If you’re a manufacturer that distributes its products through various regions, you will, undoubtedly, come into various supply chain issues. Hub and spoke systems are used to ensure that, when a system needs urgent servicing, the right parts are available in a region to get the show back on the road.
One particular problem is that, over time, service vans, at the end of ‘spokes’, can be full of items that are no longer required. This is an issue as every item on the van has a weight and cost. Removing all items and only loading the vans where required is not an option as this severely slows down the supply chain network. It’s a double-edged sword as the wrong items in a van take up storage space leaving less space for the right items. Furthermore, some items in those vans collect dust over time. This is a serious issue as dust can get into the items and damage them. Therefore, they lose their value as they become obsolete. The same happens when a part has a limited shelf-life and is left in the van for too long – it becomes unusable.
Both scenarios can become expensive problems, but the solution is easier than you might think. It’s all about continuous improvement and learning the best service van stocking strategy. With the right technology, you can achieve anything.
By looking at a client’s data, we understood they had far too much stock in the vans and way less in the Work Centre where it can easily be transferred to the right van. As such, they decided that 2 weeks stock should be held at their distribution hub, and 1-week stock should be held at the work centres. This revolved around the idea that it would make their distributors more ‘fleet of foot’ and able to respond to demand in the field.
Further analysis identified that the profile of stock was not optimised as well as they expected. By looking at product behaviour and the ABC analysis at each point in the supply chain, we can remove the outliers to understand if we have the right mix of stock in the right place at the right time.
Our analysis qualified that both the service vans and the work centres are currently overstocked. We called upon the DS platform to identify the core stocking habits in the service vans. We looked at a sample set of data of 11,000 records that covered a specific territory. From here, we saw that each van was stocking around 1000 SKUS’
(30% of the stock onboard), that had not been utilised in the last 12 months. While this is not unusual for a healthy business, the client wanted to make a change. The new world of COVID 19 has sparked a revelation in the approach to supply chain management. As such, we managed to refine things through continuous improvement that led to a reduction/redistribution of around 30% of stock across the territory.
Releasing The Capital Employed
Releasing the capital employed is a method of getting an influx of cash for your business. Capital employed can refer to the value of all assets used by a company to generate earnings. In this scenario, it refers to the stock being distributed. The idea is that you release the monetary value of items that are no longer required. This can lead to the following benefits:
- Gain money that can be put towards getting the right stock to the right place at the right time
- Reduce the overall storage costs for a business
- Improve cash flow
What is not to like? How do you remove the outliers from your forecast to see the desired results? Well, it’s easy to do this by following 7 extremely simple steps:
- Understand the business rules that you want to implement based on product behaviour. This will obviously vary from company to company depending on what products you’re distributing.
- The rules you agree on in step 1 will dictate your forecasting and stocking policies. This is the next thing to focus on.
- After this, you must set benchmarks to measure when the products are in too large or small quantity.
- The smarter businesses will take these benchmarks and get alerted to thresholds over which you want to investigate. This can include, but not be limited to:
- Alerts when a product changes behaviour. In essence, this refers to events like an increase or decrease in sales, whether a product becomes more/less erratic, or if it fails to perform to the planned forecast.
- Alerts in the supply chain. Here, you are looking more at things like whether trailers are late arriving, or are understocked, or overstocked at that specific point in the supply chain.
- By setting these alerts, you will waste far less time in analysis paralysis. This is a highly common issue in a lot of businesses nowadays. You spend far too much time figuring out how to move forward as you are overanalysing so much data. Now, you are in a position, to move on quickly and focus on the jobs you have trained to do.
Following these 7 steps will help you figure out how to reduce storage costs and improve your service van stocking system. Continuous improvement is one of the key supply chain best practices to follow, and it’s evident in all that we do. Part of this revolves around making different implementations to find new opportunities. All of the implementations we embark on are designed to help identify new avenues to save time and money. As an example, if a process to review and update customer forecast usually takes 1 person 7 hours. That’s a substantial amount of their time, and if they are calling on other people to confirm the figures it takes time out of their working day too. With the added functionality available in a digitally connected planning platform, we can reduce what was a day’s work just 20 minutes. Think about how much extra time this individual now has to focus on other aspects of their job.
Ultimately, it is all about ensuring that you have a productive and profitable supply chain throughout your distribution network. If you’re keen to learn more, feel free to view our case studies or check out our solutions.