Jewelry supplier sparkles at inventory management
By Staff -- Manufacturing Business Technology, 3/1/2006 12:00:00 AM
Stuller Settings, a jewelry component and accessory supplier, bills itself as a just-in-time supplier that promises its customers it will "carry inventory so you don't have to." Orders placed by 5:00 p.m. are expected to be delivered the next day.
Meeting these commitments is particularly challenging for a company that handles more than 100,000 products and faces highly seasonal demand. Shipments typically more than double during the peak period in December.
Jay Jackson, Stuller's VP of supply chain, says an inventory management application from GAINSystems makes it possible for Stuller to consistently satisfy its customers. It wasn't always that way, however.
In fact, Jackson says GAINSystems' Inventory Chain Optimization (ICO) solution did an excellent job of managing planned production, but had limitations that Stuller couldn't live with long-term.
Stuller operates two factories: one in Mexico for planned production, and one in Lafayette, La., which handles special orders.
"[The program] didn't take into account the times when we didn't have short-term capacity to produce the amount of inventory it recommended," Jackson recalls. "It couldn't handle special orders, and it didn't prioritize out-of-stocks or back orders."
Jackson took these problems to GAINSystems, along with a possible solution. Armed with his own set of forecasting rules—and a good set of historical forecasting and sales data—Jackson suggested that GAINSystems create a program that would allow Stuller to automate all of its production planning.
GAINSystems jumped at the chance, and when the solution was ready, Stuller became the beta tester for the module, which is now part of version 7.0 of the ICO solution.
ICO uses complex algorithms to calculate all the variables—including the need to boost December inventory—that go into setting Stuller's production plans. It uses relative error ratio—a measure of the historic forecast accuracy on particular stock keeping units (SKU)—to determine which items have the smallest probability of forecast error, the ones safest to build ahead. It also factors in the required service level for each SKU—how important it is that the item be in stock—and the profit margin on each item. The result is a prioritized production schedule for the next day.
GAINSystems implemented the system in about 12 weeks. The results have been impressive. "We consistently hit our 99-percent line-item fill rate service targets with 27 percent less inventory and an operating cost reduction of 23 percent," says Jackson.
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