Ansaldo Energia

An Inventory Optimization Case Study

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Highlights
  • Needed new approach to managing spares inventory
  • Optimized replenishment with SKU-level demand variability analysis
  • Dramatically improved service over next two years

Project and Objectives

Ansaldo Energia’s Spare Parts Service team was faced with a changing business environment. In an increasingly competitive market, their order-based production system wasn’t meeting their customer service and inventory efficiency needs.

While inventory holding costs were certainly a consideration, their most pressing issue was to avoid late delivery to clients. Relationships with customers were increasingly governed by long-term performance-driven Service Agreements, even with penalties. And they were faced with high demand variability and unpredictable emergencies.

Ansaldo switched from an order-based spare parts system to an inventory-driven system. The new approach allowed them to offer more complete and timely service to their clients. They could also plan and forecast parts requirements better and anticipate demand trends.

However, transitioning from “supply to order” to “supply from stock” required a new approach to managing spares inventory.

Day-to-Day

Ansaldo implemented ToolsGroup’s SO99+ inventory optimization software system for predicting demand and optimizing stock levels. Integrated with Ansaldo’s SAP management system, this advanced planning suite automatically calculates the optimized inventory levels required to reach desired service levels while minimizing stock holding costs. It analyzes demand variability and exploits the unique demand characteristics of each SKU to optimize spare parts replenishment. While employing an automated scientific approach, it still allows manual addition of commercial and technical intelligence.

SO99+ integrates cleanly with the SAP platform and complements it by providing optimized inventory levels to achieve segmented service level targets. It extracts historical demand and logistical parameters from SAP, performs a wide variety of analytics, and then returns procurement proposals to SAP. While the process is highly automatic, it is overseen by demand planners and other key users.

The inventory optimization system has also become an integral part of the company’s Sales, Inventory and Operations Planning (SIOP) process.

Results & Benefits

Optimizing their spares inventory generated a broad array of benefitsfor Ansaldo Energia. Increased parts availability dramatically improved service levels from 72% to more than 97% over a two year period.This significant service improvement was achieved while maintaining approximately the same amount of total inventory.

Other benefits included:

  • Reduced direct (e.g., expediting) and indirect costs from late deliveries
  • Reduced warehouse costs and improved processes
  • Improved capacity to negotiate with clients and suppliers
  • Optimized management of long-term Service Agreements
  • The bottom line has been improved competiveness of the service business unit relative to its competitors, which has helped the company increase market share.
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Ansaldo Energia part of the Finmeccanica group, Ansaldo Energia builds turnkey electrical power plants, produces the main components for these plants, and also provides maintenance, upgrade, and spare parts support for both proprietary and non-proprietary clients. Ansaldo Energia has built power plants in 89 countries around the world.

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