At Kronans, decentralization had gone too far. The company’s inventory of 27,000 stock-keeping units (SKUs) was being managed mostly manually from Kronans’ 320 stores. The cumbersome forecasting process was not getting the right results—the inventory-to-sales ratio was too high, and Kronans could not properly manage varying seasonality patterns, frequent product replacements, and new pharmacy launches. The company was also having difficulty forecasting generic substitutions, long-tail items, and seasonal demand.
Kronans wanted to centralize inventory planning and replenishment, with a goal to lower inventory value by 15% and increase service levels by 1.5%. The decision was made to move from users planning and managing inventory at each location to an automated demand planning and replenishment system, freeing time to be more helpful to customers.
Together with their trusted supply chain advisor Optilon, Kronans chose ToolsGroup’s SO99+ planning software to plan and optimize inventory across its supply chain. Using a single model for end-to-end planning, SO99+ achieves the desired service level by factoring in logistical constraints to calculate optimum inventory levels, critical parameters like safety stock and reorder levels, and replenishment proposals.
Kronans focused on change management during the rollout, to ease the transition for users that were turning over most planning activities to an automated system. A tailored communication plan targeted stakeholders with information and demos based on what each needed to know; IT support, sales coaches, and regional managers stayed in close contact with the pharmacies during the project.
Kronans Apotek ran pilots to prove out the software. “In the middle of the Christmas shopping period, a very important part of the year for all retailers, we were so confident in the solution that we asked the first 9 pilot pharmacies to go live with all products,” Jalap says. After piloting, the full-scale implementation brought up an average of 28 pharmacies per week.
SO99+ calculates demand forecasts, optimizes inventory, and generates procurement proposals for replenishment based on consolidated demand forecasts for 23,000 products across all 320 Kronans locations. “SO99+ optimizes each article and each sales entity,” says Tina Jalap, manager for replenishment. “For us, this was a necessity, as we had pharmacies spread across the entire country, ranging in size from small entities inside health centers to large stores in malls.”
Kronans achieved its targets, decreasing inventory value by 10% and raising service levels by 1%.
Four people now work centrally to supply products to its 320 locations, instead of staff at every pharmacy that had to spend their valuable time and resources. This reduced the planning workload by a total of 24 full time equivalents (FTEs) across the retail stores.
Kronans not only centralized inventory management—it established core, efficient supply chain planning with the agility to adapt to business change. For example, the pharmacy chain uses SO99+ for promotional campaigns; during the campaign, products are supplied through a temporary increase in parameters. “This increase is removed 10 days before the campaign ends, allowing the volumes to sell down; SO99+ then excludes the temporary increase from future forecasts,” Jalap says. “The software also ‘learns’ from previous campaigns, as well as from customer patterns and seasonal variations.”
Kronans can also better manage seasonality. Sweden is a large country; seasons don’t begin at the same time. Kronans uses the software to add a season code that classifies pharmacies by their location in the country; it also defines which pharmacies peak in summer or winter.
Kronans was also able to use the solution to create substitution groups for generic products, so the demand for any previously proprietary prescription is automatically added to the genericized version.
Forecasting demand for emergency medicine items with intermittent sales was another big plus. Kronans pharmacies keep certain prescribed products in the stores even if sales volumes are low. The software allows it to add a minimum service level to these goods, so they will not fall below that threshold when the inventory is optimized.
“We are finding solutions in the software for everything we need to do," Jalap says. “The implementation has been a great success.”