Investments in supply-chain technology can reap big rewards, even for small companies. Just ask John Krieger, CEO and president of automotive parts distributor Star Sales and Service.
Less than two years ago, Krieger says his inventory management and ordering process had grown antiquated and too costly. Each time one of his customers, many of them repair shops and dealerships, needed a part they would call Star to see if it was in stock. They then had to tell their own customer the pricing and availability information before calling Star a second time to place the order.
Star's inventory-management system provided data that often was at least a day old, so the company found itself running out of popular parts and holding too much inventory of parts that didn't sell as rapidly as expected.
Star has four wholesale store locations, and its inventory-management system made it difficult to ensure that it had the proper amount of each part at each location. "I could do it," Krieger says. "But I had to roll up my sleeves and spend a day once a month to do it."
So Krieger set out to build an electronic store and a real-time inventory management system. "We needed to get our information on-demand, and our old system just couldn't get us there," he says.
In May 2003, Krieger deployed an integrated suite of supply chain and electronic-commerce applications called DMS Distribution Express from IT integrator and services provider DMS Systems Corp. The system runs with IBM WebSphere Application Server Express, DB2, and an eServer iSeries back-office system. Star also turned to DMS Systems for its Qwik-Order Web-based online store.
The new systems have produced a number of gains, Krieger says. The online store has slashed the number of calls flowing into his order desk and improved inventory management. Since the new systems were deployed, Star has improved its inventory turn-around time by 95% as a result of more-accurate forecasting of inventory demand from the trend analysis provided by the DMS software.
The software also lets Star track individual parts by part number, rather than by manufacturer. It also replenishes inventory based on how long it would take for the parts to be delivered, rather than the minimum/maximum order system he used in the past. "One part from the same manufacturer could have an [estimated time of arrival] of seven days, while a different part may be 24 days. The new system can account for the timing difference, which is huge," Krieger says.
Star has 30,000 parts valued at around $2 million in inventory at any one time. Thanks to the new software, "we've identified $500,000 in wasted inventory," says Krieger. It also helped to boost the company's gross margin by nearly 20%, he says.
Orders on Star's online store for the month of April surpassed 1,300. "That would have been 2,600 calls into the order desk," he says. "This is a much more effective way to do business."
The real-time system also helps Star better manage staff. "Now if a large shipment of parts comes in, and the phone lines aren't busy, I can re-allocate those workers to the receiving dock," Krieger says. "In the past, they would have just sat there until the phone rang."