Dale Groetsema, Supply Chain Leader for Boise, deals nearly every day with the difficult problem of how to manage inventory in a long supply chain, owning the inventory all the way from raw material (the tree) to finished product in the warehouse. Manufacturing takes place at the mills located near the source of raw material, while customers are located mostly in distant metropolitan areas. In between, most of the product is shipped via rail, since shipping bulky paper products by truck is often not an economical option.
So the average transit time is more than two weeks. “At any given time, much of our inventory can be just sitting in rail cars,” notes Dale.
Given this challenge, the Boise team set out in 2008 to reduce stock inventory by 10% while improving on-time delivery service levels. The project had a tight timetable to roll out office papers in four months and specialty papers, printing and converting a few months later.optimal balance is a difficult process but one that can make a huge difference on the price and availability of medicines.
ToolsGroup’s SO99+ Inventory Optimizer was chosen as a key component of a new Sales, Inventory & Operations Planning Process (SIOP). SO99+ captures daily sales history and extracts replenishment parameters. The system sets solve constraints – service levels and inventory minimums – based on service classes and then calculates safety stocks and exports them to DSRP. It also predicts inventory requirements for SIOP planning.
The system also supports Boise’s product segmentation strategy, which allows them to focus their resources where they matter most.
In the first year, Boise achieved more than double their inventory reduction target, cutting inventory by more than 20%. At the same time, they improved service level by three full points, far exceeding their goal.
“We had one customer re-up because we could provide them service they couldn’t get anywhere else,” says Groetsema, “And we accomplished it without increasing inventory or manufacturing capacity.”
Some important benefits have been “unexpected”; gained from a more structured, scientific inventory planning and optimization process. They include: