There are well-known quick fixes an inventory management solution can bring to a distributor, such as cutting back on disappearing products or eliminating user error from incorrectly typed SKUs on a manual tracking spreadsheet. But the data available from inventory management platforms can also present a long-term strategic opportunity in the form of improved demand planning, exposure of costly trends and even visibility into competitors’ share of customer spend.
Improved Demand Planning
Standard demand planning and forecasting is inherently a backward-looking process that is based on historical customer orders — orders that may not reflect actual use due to the tendency to overstock “just in case.” Inventory management solutions allow for the establishment of min-max replenishment numbers that are based on actual usage.
Inventory management company eTurns, for example, automates inventory replenishment with phones, scanners, IoT sensors and RFID that provides real-time inventory visibility. Once min-max numbers are established, the distributor can monitor customers’ data to know how much product customers are going to order and when they will order it. “We call it precise demand planning, because it’s no longer a forecast. It’s based on actual usage and the current state of affairs,” says Rock Rockwell, eTurns CEO.
Electrical distributor Rexel USA has worked with eTurns for more than a decade. R.L. Newell, IT lead, appreciates how much it has streamlined the inventory process and reduced human error. He says Rexel uses the data it accumulates to do year-to-year forecasting, especially for larger customers. “As long as the economy’s going well, we can project and be pretty spot-on,” Newell says.
Introducing vending machines into inventory management gives customers control over product simply by putting it behind glass, eliminating the ability to horde or lose track of items. It can also expose revealing usage data when employees need to enter a badge or pin number to access items. “Once you start tracking something, there’s a number of efficiencies that come about,” says Mark Hill, president of industrial vending service provider 1sourcevend.
The data from 1sourcevend machines are automatically updated into the cloud every 30 minutes. One client noticed they were using too much of a particular cutting tool. After looking at their usage data over a month, they noted the same person was regularly getting a new tool at the beginning of his shift every day, rather than allowing it to reach an acceptable state of wear and tear before replacement. “That is one of the beautiful things about vending,” says Brett Canale, sales manager, 1sourcevend. “You can see those trends.”
Home Depo Pro decided to pursue an inventory solution for its special trades customers, such as plumbers and electricians, after continually seeing issues in the field, including workers not knowing what inventory they had on their trucks or needing to make multiple side trips to pick up more inventory. “There were a lot of concerns that a lot of our customers were having around inventory solutions,” says Ron Swank, senior technology manager, StockWise Solutions at Home Depot Pro.
Home Depot Pro launched its first customer with MarginPoint, a field service and inventory management software company, in the fall of 2013 after about two years of building out integrations with its own platform. There are now between 300 and 400 accounts using it, with 10-20 new customer rollouts a quarter, says Swank. Customers love the real-time visibility of seeing what is available at any given time across an entire fleet of trucks, Swank says.
With about seven years of data collected, Home Depot Pro has it “on the roadmap” to start analyzing how the company stacks up to other suppliers that customers are using. “If they’re buying certain products from a different supplier, that data is available for us to look at,” Swank explains. “We haven’t done a whole lot with it yet, but [it is] a strategy that we do have planned for the future.”
MarginPoint CEO Vince Sheeran estimates distributors see between 30% and 35% increase in spend from a customer when they are the primary distributor for that customer in the MarginPoint system. This is because, as Swank noted, the primary distributor has access to all of the customer’s purchasing data. As the primary distributor, “If I look at 1,000 items an organization buys, I might say, ‘Hey, I at least want an opportunity to fulfill these for you,’” Sheeran says. “They may pick up 40% or 50% of those items that they weren’t getting before because a lot of times organizations buy from a distributor based upon history as much as anything else. Sometimes they’ve just never had another supplier ask for the business.”
A distributor who doesn’t carry items their customer is currently purchasing from someone else may now see an incentive to start carrying those products, as the customer data show they reliably purchase them on a regular basis. At the very least, by seeing what their customer didn’t purchase from them, they know what their opportunity lost was.
“Now, they have true visibility into their customer,” says Sheeran.