Predicting lost business due to unavailable stock

Turning the light on the stock levels

Predicting lost business due to unavailable stock

Key Achievements: saving 250,000 GBP in yearly lost business and 46,000 A3 paper sheets while freeing up 1200 man hours per year that can be dedicated to analysis instead of reporting.

Challenges

The client is a wholesaler turning over 60 million GBP yearly. The procurement department is made of 12 people managing together more than 10,000 products to be purchased according to the market demand and the stock levels. Before working with us, the buyers lacked a clear view of what to buy and when, and needed to merge data from multiple information systems using Excel to make decisions that were mostly driven by individual gut-feelling. In addition, they knew that their data was not clean but didn’t have a way to identify were the data errors were. This led to the following challenges:

Lost business due to stock unavailability: each buyer had to manage about 1000 product on a daily basis without a clear picture of product sales related to stock levels. There was no way to know which product was the most critical to re-order as there was no smart decision helping tool in place to help the buyers make dat driven decisions. This led to a mismatch between the product in stock and the customer demand and as a result some potential lost business in the hundreds of thousands.

The database is not clean: The data in the database was not clean, leading to information not making sense. The challenge was not only that reports didn’t make sense and but also that there was no way to spot where to problems were to be able to correct the data. This led to decision making “freezing”, resulting in mostly gut-feeling decisions with no data to support them.

Manual reporting time: It took an average of 8 hours per buyer to review their reorder prints
per month, or more than 1200 hours per year for the department. This process will also triggered other actions such as artwork and range reviews, all manual and time-consuming.

“Half forests” of monthly paper reports: just for stock availability checks, buyers would regularly
print what they called “half forests”. When digitized, that’s a lot of paper that could be saved.

Solution

Working closely with the buyers, we developed an intelligent application made of both a dashboard prediciting the lost business due to stock unavailability and an ordering sheet with data input to enable action (items re-ordering). This real-time solution helps buyers to norrow down to the most urgent products (most lost business), to analyze why these items are out of stock and then to re-order the products that should be re-purchased. It is the single source of truth for stock availability and stock re-ordering for the procurment department, saving people a huge amount of time in reports preparation. Time can now be dedicated to analysis and taking action on insights that the team could not even dream of before.

Key saving benefits & Return on investment

Lost business due to unavailable stock: the potential lost business for items that were regularly selling before being out of stock but not yet re-ordered amounted 500,000 GBP potential lost business. We made a very conservative assumption (the potential lost business KPI could be discussed) by taking only 50% of this amount: 250,000 GBP per annum.

Help identify and correct unclean data and fields: how much value is there in enabling the buying team to spot all the problems in the database and clean/correct all the wrong fields?
Priceless, this is the basis of an ERP cleaning and of a full business processes review”, 3 of our clients’ key stakeholders

Reporting man hours saved: “It is about 1000 X faster than what we currently have!”, Buyer.
More precisely, our dashboard saves our client about 100 man hours per month or about 1200 man hours per year. The key thing to note is their access to constantly updated information giving them more time to react to potential out of stock situations.

Paper saved: our solution helped the company get rid off paper reports for this function which saved more than 26 boxes of 2000 A3 sheets per year. That’s 46,000 A3 sheets!

Transparency is accountability: having a crystal clear access to stock information enabled the buyers to spot some important problems and “broken processes” during the solution delivery meeting. For example, they directly spotted a substantial quantity of stock that had been ordered by a customer but had actually never been sold and as a result was just sitting there for more than 6 months. This problem was due to a lack of communication between the sales and the buying department. Our solutions routinely result into unearthing important yet unadressed problems and opportunities.

The Return on Investment (ROI) on this project is greater than 15X.

Evolution

This solution was a quick-win that then translated into re-organizing the whole buying department and building a few other solutions. We were then hired to re-organize the analytics of the supply chain department.