In Tough Times, Love Your Customers - Optimizing Inventor

Optimizing Inventory

Jeffrey Carlisle’s job at SKF USA is to ensure that both its direct customers and its distributors are always stocked with the right amount of inventory. The Lansdale, Pa.-based company, a subsidiary of Swedish manufacturing giant SKF Group, makes bearings, seals and lubrication systems for the automotive and industrial markets. The parent company has more than 100 manufacturing plants and 15,000 distributor locations worldwide.

For the past two years, Carlisle has used Demand Solutions’ supply chain management software to forecast its U.S. sales and to tell manufacturing plants what products to make and in what quantities. The software allows him to improve the company’s inventory turnover, while reducing its excess inventory.

“It’s critical for the sales team and the factories to communicate effectively on what the future holds and how much we need to make,” says Carlisle, director of forecasting and market analysis. “The main objective is having our products available to our customers without having excess inventory.”

Previously, the factory managers made educated guesses on how many products to make based on the previous year’s sales. With Demand Solutions’ Forecast Management software, Carlisle inputs the sales expectations for each product with historical sales data, and the software runs through algorithms to forecast demand.

With the vendor’s Sales & Operations Planning software, Carlisle is able to link the sales forecasts with the manufacturing process. Based on the forecasts, the four U.S. factories know how much they need to produce.

The technology tracks actual sales and production at the factories, and produces detailed monthly reports on how well the sales teams and factories performed. It shows, for ex-ample, if a factory was expected to produce $1 million worth of a certain product but only produced $800,000 worth. The same is true for sales teams that underforecast or overforecast sales, Carlisle says.

The software enables the sales and factory teams to collaborate, and it helps with accountability, he adds. Having monthly planning meetings, at which managers revise expectations as market conditions change, helps the company optimize its inventory levels and save money, Carlisle reports.

The software paid for itself in three months, he says. SKF’s senior management is so impressed by the technology’s ROI in the United States that Carlisle is now implementing the software companywide, including at SKF’s European plants. Good communication between the sales and factory teams is key, he says.

“We’re talking [up front], rather than waiting after the fact, when it becomes a blame game,” Carlisle says. “Everyone is involved, and we’re all in this together.”

Clearly, good communication among retailers, distributors and customers is essential to success, and that kind of collaboration is enabled by technology.