C O M P L I M E N TA RY E B O O K

Revolutionizing
Inventory Optimization
How can advancing the way you view inventory boost
your bottom line?
 Revolutionizing Inventory Optimization

Introduction
According to Supply Chain Insights as many as 75% of companies
are still trying to use Excel to optimize their inventories. Companies
relying on Excel (or other turn of the century products) struggle to
meet service level requirements while respecting financial impacts,
and have almost no chance to do it optimally. Improving inventory
optimization software remains “low hanging fruit” for many seeking
higher levels of supply chain maturity and improved supply chain
analytics.

T
he reality is the spreadsheet driven
forecasts typically fall short of their
goal unless demand is 100% predictable.
However, today’s economy is never
100% predictable. Here are some of
the situations where a more advanced
approach to inventory optimization
makes sense.
• Diverse inventory mix needs that
don’t mesh well with ABC inventory
classification or simple rules of
thumb
• Multiple demand streams, each
usually with different service level
requirements
• Global supply and demand networks
• Seasonality, replenishment
constraints
• Manufacturing constraints
• Promotional impacts
• New product introductions

Contents

01 / What’s Wrong with A-B-C

Inventory Classification 9/
7 Steps to Select the Right IO
Tool by Nucleus Research

04 / 12 /
How to Tell if Intermittent Demand is a Case Studies
Drag on Your Inventory Optimization

05 /
How Do I Make Intelligent
Inventory Tradeoffs

What’s Wrong with A-B-C
Inventory Classification?
ABC inventory classification has been around so long that most planners just assume
it’s the only way to segment your inventory. In fact, it’s not. It’s not even nearly the best
way. It’s actually a throwback from technology developed during the 1960s that hasn’t
responded to the orders of magnitude increase in computer power that has enabled far
better ways of solving the problem.
I N V E N TO RY S E G M E N TAT I O N F R O M T H E
1960 S
T
o understand the shortcomings of ABC
inventory classification, we need to
understand how it is done. Nearly all traditional
inventory management applications calculate
safety stock for each individual SKU-Location
combination. This requires identifying the
desired service level percentage for each
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Revolutionizing Inventory Optimization
SKU-Location. Since most companies have
tens of thousands, hundreds of thousands, or
even millions of combinations, it’s impossible
to identify a service level for every individual
SKU-Location. So a simplification is necessary
and ABC classification is one way of doing it. A
common method is a 3x3 matrix with the cost
value on the Y axis and order-lines on the X
axis - a so called “double” ABC classification.
The percent distribution between classes is
often based on 80% of the cost value in the A
items, 15% in the B items and 5% in the C items.
The same 80/15/5 breakdown is applied to
the number of order-lines. Because just a few
items can generate so many order-lines and
cost of sales, it usually only takes a few A items
to reach the 80% thresholds. Therefore the end
result is a matrix that looks like the following,
with a very small share classified as AA and a
majority classified as CC.
A ”trial & error” process is then used to allocate
a desired service level to each ABC class. The
AA class is often given the highest service level
and the CC class the lowest. The aggregated
service level is calculated and might end up
at 94% in the first try, which might not fit the
company’s overall goal, such as 95%. To reach
the 95% goal, iterative attempts are made
using higher service levels for one or several
classes (and perhaps reducing some). The new
distribution might turn into an aggregated
service level of 95.5%. A small buffer (0.5% in

this case) is often good, and the service
levels for each class are confirmed.
From here, all of the items (or articles) in
each ABC class are assigned the same
service level target. In the example
above, if we have 10,000 items in
stock, then 5400 in the CC class will
be assigned the same service level
target. Then the safety stock levels
are calculated which results in a total
inventory investment.
Let us think about this for a moment.
Inventory investment is a consequence
of each ABC classes’ service level. Could
we have chosen other service levels
for the classes and still reach 95.5%?
Of course! There are a large number of
combinations that could result yield the
same result.
How do we then know that the
distribution we chose is the most
optimal one, achieving a minimum stock
investment? The answer is that we don’t
know. That is why this method is called
”inventory management” rather than
”inventory optimization”.
In this example, the process for one
echelon is described. Many supply
chains are more complex, with several
connected echelons such as central,
regional and local inventories. Also,
some traditional inventory management
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Revolutionizing Inventory Optimization
software offer an 8x8 ABC matrix per
location. The workload to define and
continuously maintain these matrices
becomes very intense. As we said, we
don’t know whether or not we have an
optimal distribution.
I N V E N TO RY S E G M E N TAT I O N TO DAY
Is there another way to address safety
stock computing in 2016? The answer is,
of course, yes. A more modern approach
exists.
Traditional ABC classification is based on
an operational or logistics perspective.
There is rarely any connection to sales
and marketing or the companies’
customer needs.
Inventory optimization instead looks at
the product range and the business. This
difference is possible thanks to the use
of "service class". Examples of service
classes can be ”accessories”, ”items with
a high margin”, ”own-brands”, ”high end
brands”, and ”critical spare parts”, to
name a few. This type of categorization
is much more relevant to sales and
marketing, who often have very little or
no understanding of ABC classification.
Every service classification contains
items from several ABC classifications
(according to the old method) which is

irrelevant to true inventory optimization.
Just as in traditional inventory management,
aggregated service level goals are also
defined in inventory optimization, but per
service class instead of ABC class. What
happens in the following steps is very different
from traditional inventory management. By
using ”stock-to-service” curves, the software
optimizes every single service level and safety
stock level of the SKU-Location, which is also
known as mix optimization.
The aggregated service class goal is achieved
with a stock investment as low as possible.
Instead of inventory planning with ABC classes,
every SKU-Location gets a service level to
calculate safety stock levels. The inventory
optimization software automatically calculates
a service level for every SKU-Location that
aggregates to the total service level target
for the overall service class, achieving "service
level optimization".
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Revolutionizing Inventory Optimization
True inventory optimization models every SKU-
Location and summarizes it in a ”stock-to-
service” efficient frontier where the relationship
between service level and stock investment
are defined. If demand variation or lead time
increases, the stock investment (or complexity)
must be increased in order to keep the same
service level and vice versa.
The result is that every single item in every
single location (SKU-Location) is an individual
and is analyzed and managed as such.
In a sense, there can be as many ABC
classifications as there are SKU-Location
combinations.
This statement is impossible to fit into
traditional inventory management and so it
is a very challenging one to accept. If every
SKU-Location combination was described
with dozens of variables (demand variation,
standard cost, my order quantity, multiple
order quantity, run-out time, lead time,
variation in lead time, sustainability, and more),
it would unmanageable, instead of just one
or two dimensions, as in a traditional ABC
classification matrix.
By the way, it’s important to point out that the
automated differentiation of service levels in
each service class can be set within defined
limits. As an example, the aggregated service
level goal for “accessories” could be 93% with
a lower limit of 89%. The inventory optimization
can then subscribe any service level from 89%
and above in a way that the stock investment
is minimized. For example, “critical spare parts”
could have a goal of 99.5% with a lower limit
of 99.3%. Reducing the degrees of freedom
in each service class (or increasing number
of service classes) will lessen the potential
of inventory reduction, since competition is
reduced. But these reductions in freedom
are not critical as long as they aligns with
company strategies and customer demands.
 Revolutionizing Inventory Optimization

How to Tell if Intermittent

Demand is a Drag on Inventory
Optimization
A
s supply chain complexity grows, so In fact, many of today’s businesses are
too does the number of items that do not even aware of how deep intermittent
not fall into an easily predictable restocking demand effects their business. Here is a quick
pattern – causing intermittent (long-tail assessment to determine what intermittent
demand). Intermittent demand creates risk demand is doing to your business.
to service levels and the tied up cash to
cover expected need. It’s especially true for
businesses where parts and/or distribution are
a significant portion of the product portfolio.

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 Revolutionizing Inventory Optimization

How Do I Make Intelligent

Inventory Tradeoffs To Drive
High Service Levels and
Revenue Growth?
Every supply chain planner wants to deliver high service levels to support revenue growth,
but relying on forecast accuracy alone cannot achieve the goal, because it is nearly
impossible to generate a perfect demand forecast. As business complexity grows and
demand volatility increases, it becomes harder just to keep from falling further behind in
meeting forecasting KPIs.

L
uckily there is a solution: modeling
demand and uncertainty and using that
knowledge to make intelligent inventory
tradeoffs that enable high service-levels and
customer satisfaction. Traditional forecasting
systems can't do this because they are
“deterministic”—their internal processes view
all data as exact. They take exact values
as input and they output exact values, so
the forecasting calculation is oblivious to
the uncertain nature of the demand. Any
deviation in demand, no matter how normal, is
considered as error.
Demand modeling works differently; everything
is “stochastic” (probabilistic). Stochastic
modeling systems train their sights on a
more accurate forecast, but by modeling
probabilities and then factoring in random
behavior. The outcome is a value within
a range, and each value has a certain
probability of occurring. This leads to higher
service levels and revenue growth. Here’s how.
D R I V I N G D OW N TO T H E D E TA I LS
Demand modeling breaks data down to make
the baseline demand as detailed as possible.
The most common granularity is the individual
sales order-line, by item and by ship-to
location daily. This data is readily available at
companies that maintain detailed demand
histories in the form of individual line-orders.
They know if monthly or weekly demand for 48
cases was generated by one very large order
for 48 cases or by 12 smaller orders with an
average size of 4.

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This information is very useful in modeling
demand. For instance, variables such as
line-order frequency and line-order size are
building blocks for both predicting future
demand and determining how much inventory
is required to absorb the demand volatility to
guarantee desired service levels. And from this
detail, patterns can be identified. For example,
each ship-to location may show clear ordering
patterns for certain days within weeks, or
weeks within the months.
CAST I N G A W I D E N E T F O R D E M A N D
DATA
Other insights come from downstream or
channel data, which can improve forecasting
by extending supply chain visibility to
take advantage of daily sell-out data
and store-level or DC inventory positions.
This downstream data helps reduce the
uncertainty of expected orders to better
understand customer behavior and translate it
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Revolutionizing Inventory Optimization
into upstream forecasts.
Planners can’t possibly manually factor in
the mountains of demand data available to
them—promotions, new product launches,
projected life cycles, returns, substitutions,
and even data from social media that signals
customer sentiment. Demand modeling
systems automate the bulk of this far-ranging
forecast process. This frees planners to take a
low-touch, “advisory” approach, fine-tuning
the baseline forecasts with their supply chain
domain expertise and knowledge of business
upside and risk.
Demand modeling disaggregates forecasts
down to the channel and SKU level. Combined
with POS store data and online sales
updates, they predict what stock needs to
be in the store for on-site customers and in a
distribution center for online shoppers. After
fulfillment they refresh stock, using algorithms
to re-balance inventory across multiple points
of service, calculating the optimal service
point to satisfy the shifting demand.
Advanced analytics like machine learning,
embedded in demand modeling software, can
further define the baseline demand forecast
by identifying the effect of demand indicators
at a detailed channel level. They “decode”
structured and unstructured data streams,
automatically analyzing the variables and
their complex interactions and patterns to
"self-learn" the demand profiles.
B E T T E R D E M A N D DATA I N F O R MS
S M A RT E R I N V E N TO RY T R A D E O F FS
Better demand modeling—accomplished
via a precise and robust statistical model of
demand variability—improves safety stock
calculations for smarter inventory tradeoffs.
While it's helpful to forecast average demand,
more important is the upper demand
boundary and the likelihood of the possible
outcomes in between. Knowing the probability
of each possible demand outcome, such as
 Revolutionizing Inventory Optimization

being 1 unit or 10 units, or some number in
between, can be far more important than the
actual forecast.
Stock-to-service modeling can then drive
the stock calculation and inventory tradeoffs.
To achieve a target service level requires
generating a stock-to-service curve that
specifies how much inventory is required for
each level of service.
This is done by incorporating a statistical
description of all the demand streams and all
the replenishment parameters. These models
take into account the expected demand
behavior and factors like inventory control
policy, minimum and incremental lot-sizes,
lead-times and lead-time variability, review
periods, etc.
These systems deliver the granular knowledge
to make intelligent inventory tradeoffs that
deliver service levels that support revenue
growth. Inventory has costs—working capital,
stock management, space, insurance, stock
loss, expiration, obsolescence, damage, and
markdowns. Yet it is crucial to service levels
and managing unforeseen events.
includes 4 factories, 23 production lines, and a
distribution center. Products reach market via
four channels—retail, food service, industrial,
and international.
Like many food manufacturers, Findus favored
service levels to meet the tough demands
of customers. This meant holding artificially
high safety stocks to ensure availability, which
didn’t sit well with board members. But a
new demand modeling system let planners
update and control safety stocks levels every
month, rather than every six months as before.
It also allowed the team to advance from a
“one-size-fits-all” channel strategy to treating
each channel differently, according to its
unique demand patterns, volumes, and other
properties.
Findus topped its original goal to cut inventory

Inventory becomes less of a challenge the

more effectively you can model demand. The
better you grasp demand characteristics,
the more reliable the sales forecast and
predictable the supply chain requirements.
A right-sized inventory strategy, with the
appropriate stock tradeoffs, couples capable
demand planning with production, storage,
transport, lead time, service level, and working
capital constraints.

A N E X A M P L E O F S E RV I C E L E V E LS
D R I V I N G G R OW T H

Findus AB, the largest frozen food firm in the

Nordic countries, has a team that manages
the supply chain for 800 finished goods
items (20% replaced yearly) and 2000 raw
material SKUs. The distribution network

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by more than 10%, reducing working capital
requirements by more than SKR 20 million ($3
million). Once the results demonstrated to the
board that service didn’t have to come at the
expense of capital, the supply chain team
switched from its mandate to free working
capital to prioritizing service levels. They then
increased service levels significantly, especially
in the retail channel, to 98%.
D E M A N D M O D E L I N G A N D I N C R E AS E D
S E RV I C E L E V E LS L E A D TO G R OW T H
Demand uncertainty is best managed
using planning tools that employ adaptive,
probabilistic algorithms. They deal with
demand volatility and demanding response
times, particularly as caused by online
and multi-channel markets. Their adaptive
modeling includes a high level of automation,
so planners need to intercede only for
exceptions that fall outside the boundary
limits of statistical uncertainty.
With advanced demand modeling, planners
can improve their short-term forecast
accuracy and correctly set safety stocks,
reaching high customer service levels while
significantly cutting inventory. Demand
modeling understands the SKU by the
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Revolutionizing Inventory Optimization
SKU demand variability at the heart of the
inventory issue. It sets targets at an SKU, not
aggregate level, for each stocking location.
Because it precisely targets and continuously
optimizes inventory, firms don’t blindly
overstock, but buffer only where there is a
likelihood of demand and sales.
The result is that excellent customer service
levels up to 99+ percent are now achievable—
with a huge payback. Even a modest increase
in fill rate generates fewer lost sales, higher
market share, more margin contribution, and
the ability to satisfy even the most demanding
customers. By understanding each SKU’s
stock-to-service relationship, advanced
demand-driven modeling and inventory
optimization can help you reach your service
objectives to power revenue growth.

7 Simple Steps to Select the
Right Inventory Optimization
Tool by Nucleus Research
Inventory optimization (IO) software has a high-impact on ROI; reducing inventory, freeing
up working capital, and boosting service levels, which result in fewer stock-outs and
increased sales. It is essential to select the appropriate IO tool to get the desired payback
from the investment. Here are 7 things Nucleus research has identified as steps to consider
during the selection process.
U N D E RSTA N D W H AT YO U A R E T RY I N G TO
ACCO M P L IS H .
C
ompanies have turned to inventory
optimization solutions as a way to set
precise stocking levels for thousands of stock
keeping units (SKUs) in their supply chain. For
companies running complex supply chains.
Before contacting providers with an RFI,
Nucleus first recommends that you determine
what the primary business reason for buying
the tool is.
• Is the tool needed to reduce inventory
to free up working capital? Or does the
company need to ensure that it has the
right amounts of inventory and inventory
mix on hand to support sales and drive
revenue?
• Does the company have a problem with
maintaining stock to address growing
volatility in the market?
• Does the company want to keep the
right parts in stock to reduce expediting
costs and provide a more level signal to
production scheduling?
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Revolutionizing Inventory Optimization
• Does the company have twin goals:
inventory reduction plus better service?
• What capabilities are unique to your
industry?
B R E A DT H O F F U N CT I O N A L I T Y
Providers should provide multi-echelon
(MEIO) solutions as standard functionality,
thus allowing companies to adjust inventory
holistically across multiple locations in the
supply chain. The solutions should also employ
a stochastic model for inventory calculations,
meaning that the application not only
identifies the most likely outcome (the forecast)
but also the implications of possible upper
and lower limits of demand fluctuations.
To be effective the tool must be able to model
inventory at the SKU level and by location.
Granularity at the item level is critical to
determine the precise inventory holdings
by location to meet anticipated demand.
Keep in mind that IO tools are really a form
of predictive analytics, and the best-in-class
tools are the ones that do the most accurate
job of predicting the amount and type of
stock to carry at each location. Generating
high-level predictions and then smoothing

them to the individual SKU-location level will
not get the job done right.
Since the key to IO is modeling the supply
chain accurately, if that’s not done right,
a company won’t get favorable results, no
matter how many features and functions can
be found in the tool. Supply chain executives
should not get caught up in the old way of
buying transaction-based software – with
long detailed lists of feature and function
requirements along with vendor responses.
CO N D U CT A P R O O F O F CO N C E PT
Before making a firm commitment for a
solution, a company should test drive the
software. A Proof-of-Concept (POC), involves
providing actual data to the vendor and
asking the vendor to validate the software’s
ability to build a working model of its solution.
The data selected could be for a geography, a
product line or some representative portion of
your business. Providers should be given actual
company data for the trial. Take a significant
portion of items from the company’s inventory
and ask the vendor to run its model to set
inventory levels. Then compare the vendor’s
test scenario with what actually happened.
The test should be substantial enough to
verify the sustainability of the process and the
scalability of the solution. A successful test
should offer proof that the solution can indeed
improve service levels and minimize stock,
thus offering a clear indication as to whether
the company will get a payback from the
investment. NOTE: The proof of the test should
help avoid a “feature and functionality” bake-
off – where the bells and whistles supersede
the actually functionality of the proposed
solution.
AU TO M AT I O N O F P R O C E SS / R E D U C I N G
M A N UA L TAS KS
Consider how automated the solution will
be once it is set up and running. Optimized
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Revolutionizing Inventory Optimization
inventory models are rather complex and
not very intuitive, especially when optimizing
across either a wide range of products or
upstream and downstream in the supply chain
(e.g., postponement). It’s important that the
IO tool provide an automated solution so that
the planners can use the output of the tool to
focus on exceptions from plan or problems. A
sustainable solution should allow the business
to scale up, handling additional it as the
business grows or changes, or the supply
chain operation becomes more complex. In
short, the solution should automatically and
continuously adjust a variety of conditions
and changes without constant manual
intervention.
E AS E O F U S E
The selected solution should be easy for
supply chain planners to use in their daily jobs.
Although many of tools offer a high degree of
functionality, planners still need to understand
the application and the results. For instance;
• They need to be able to define their
“service policy” (target service levels for
classes such as high margin products),
so the IO system can translate service
targets into inventory targets.
• Leading Providers should offer a graphical
user interface (GUI) that allows a user
to grasp visually the intent of “what if”
scenario settings.
• The tool should come with dashboard
analytics, a grouping of widgets in a
console that allows the user to spot key
metrics at a glance.
Ultimately a supply chain planner doesn’t
need to manage the minute by minute inner
workings of the analytics engine but does
need to be alerted to unusual conditions that
require intervention.

M OV E TO T H E C LO U D
Nucleus Research has determined that cloud
solutions get a 1.7 X greater ROI than on-
premise applications. That’s because cloud
solutions do not bear additional costs for
installation, hardware systems, integration,
maintenance, and provide for configurability
in setting up the solution to a company’s
specific business needs rather than having
to undertake custom coding. Companies
may also save considerable amounts of
money by purchasing the cloud software on
a subscription basis rather than laying out a
huge sum of money upfront for a license.
P OST-SA L E T R A I N I N G A N D S U P P O RT
Nucleus Research has found that 56% of
companies having dedicated users for a
supply chain tool received their desired ROI
compared to only 33% of companies without
distinct users. In order to develop skilled tool
operators, the vendor must provide thorough
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training and high level of support to the supply
chain staffer. The vendor should be able to
provide consistent support to the IO tool user
in the company in order for him or her to gain
the mastery required. Companies should ask
the vendor for user references to validate
claims of after-sales support as the level and
amount of that support should be the decisive
factor when presented with IO solutions
with the same functionality, friendliness and
payback.
Selecting the right IO provider ensures that the
company will get a payback on the software
investment in less than a year. Nucleus has
found that when deployed correctly, inventory
optimization can reduce stock holdings
between 10% and 30 %. It can also increase
service levels without adding to inventory or
bring about a combination of inventory and
service level improvements. When you follow
these seven steps, you’ll increase the likelihood
of attaining this payback.
Inventory Optimization Success Stories

Many organizations were where you are now.

Here are a few examples of retailers that have successfully adapted to the new
inventory optimization landscape through supply chain transformation.

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LENNOX
Lennox International is a leading provider of climate control solutions for heating,
air conditioning, and refrigeration markets around the world. The Residential
HVAC business unit represents about 42% of $5 billion total company sales.

CHALLENGE
Lennox Residential Heating and Cooling faced the challenge of managing an ambitious North American distribution network enlargement
while simultaneously transitioning to a hub-and-spoke model with 55 shipping and 161 selling locations.

Rebecca Roberts, Director of Supply Chain Planning, realized that the business scenario called for a flexible, self-adjusting system with
comprehensive statistical forecasting that could set stocking targets at an SKU-Location level based on demand variability, service levels,
costs and other parameters.

SOLUTION
Lennox implemented ToolsGroup’s SO99+ solution to dynamically rationalize the inventory mix and create an operational plan that sets
inventory stocking targets and balances service levels with inventory cost. The system allows Lennox to reliably model both seasonality and
variable demand patterns. Network inventories are rebalanced by creating a dynamic optimal mix of inventory and service levels down to
the store level. Lennox can also set global service policies by group or category and then the system automatically calculates individualized
service levels for each SKU-Location.

The solution is integrated to Lennox’s SAP APO platform. Deloitte Consulting provided integration services and addressed key strategy,
technology, and change management issues.

RESULT
• Improved service levels by 16%

• increased inventory turns by 25%

• Supported significant increases in sales and market share growth

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PIAGGIO
As Europe’s largest manufacturer of two-wheeled vehicles, Piaggio is known
throughout the world for superior technology and design. Since 1946, Piaggio’s
stylish and fuel-efficient brands of motor scooters (including the famous Vespa)
have been the epitome of practical indulgence.

CHALLENGE
Piaggio USA’s new Director of Spare Parts, Marco Ciccolini, found himself working extra long hours and even weekends to field numerous
complaints from dealerships in the wake of abundant backorders. He also found that he was dealing with a high level of dead stock
resulting from an inability to sense regular versus specialised demand. His challenges were compounded by managing three different
product lines with a very heterogeneous aftermarket part mix. And despite experiencing service levels that had dipped as low as 50%, his
organization was relying far too much on expediting shipments via air freight.

SOLUTION
Within a few months, the process for fulfilling spare parts orders was quickly revamped. The SAP R/3 system now feeds data into a parts
database and inventory file. SO99+ takes this information, applies analytic models, and generates replenishment proposals. These proposals
become the basis for parts orders, which are finalized in SAP. The overall process both identifies the inventory needed to fulfill orders and
models in-transit and safety stock to minimize inventory while maintaining high service levels.

RESULT
• Five-day service levels across Piaggio USA’s brands leapt into the 90% range, sometimes exceeding 95%, and most important,
remained highly consistent thereafter

Despite the significant upswing in service level, the company’s inventory turns actually improved slightly. Going forward, Piaggio USA’s goal is
to maintain these high service levels while further fine tuning the system to increase turns.

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MOHAWK
Founded in 1931, Mohawk is a fourth-generation, family-owned and operated
business based in Cohoes, New York, with global sales and operations located
throughout North America, Europe and Asia. Mohawk is North America’s largest
privately-owned manufacturer of fine papers and envelopes which are preferred
for commercial and digital printing, photo specialties, social stationery and high-
end direct mail.

CHALLENGE

The fine paper industry is unrecognizable from 20 years ago. The internet, globalization and changing customer demand have transformed
it from being a traditional, high-volume and personal business to one where it is now possible for a customer to buy a single sheet of paper
online. Naturally, these changes have resulted in market consolidation. Mohawk Paper Mills acquired the Fine Papers division of International
Paper, followed by an acquisition of the brand assets of Smart Paper and recently Crane Stationery, making it North America’s largest

SOLUTION
Mohawk’s SO99+ deployment plays an essential role in Mohawk’s ongoing transformation program. It supports collaborative goal-setting,
negotiation and decision-making by giving all players in the extended supply chain a transparent, shared view of data that they can trust.
Mohawk continues to fine-tune its existing S&OP process to optimize inventory, which is powered by ToolsGroup’s SO99+. This defines
inventory targets for each stock item at each location across the network and performs forecasting, service-level planning, and inventory
mix optimization. It also handles requirements planning, resupply of regional (level two) DCs and passes manufacturing replenishment
requirements to their production scheduling system.

Key to bringing Mohawk’s extended supply chain into the transformation program was establishing a new data management team. This
team provides specialist data hygiene, modeling and analytics skills to support the distributors, which aren’t set up to bring this expertise

RESULT
• Transformed to a supplier collaboration culture based on data, trust and shared objectives

• Higher profits enabled company to thrive in a declining market

• Customer-service levels increased from 85% to 93% in just six months with significantly fewer costly rush orders

• Global inventory lowered by 25%, with 8% sales growth and over 40% improvement in inventory turns

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Book a Demo
To learn how you can take control of your supply chain,
call the ToolsGroup team at 617-600-7522 or visit
https://knowledge.toolsgroup.com/contact-toolsgroup