South African supply-chain specialist CargoSolutions (a division of JSE-listed Cargo Carriers) will show off their revolutionary TOC*-enabling Symphony software, that reduces stock-outs, missed sales and overstocking – at this year’s SAPICS conference at Sun City from 1-3 June 2014.
“It’s a phenomenal tool for optimising profit throughout your supply chain,” says CargoSolutions Director Dawid Janse van Rensburg, “as we’ve proven with our involvement with Merpak.” Merpak is a specialist envelope manufacturer – an industry that is allegedly “dying” in the face of digital competition – and in 2010, it was an overpopulated sector with very low profit margins. It was then that Merpak completely overhauled their supply-chain management using Symphony. “By 2013, when CargoSolutions’ involvement ended and the system was handed over to Merpak to run on its own, lead times had been reduced by more than 20%, the availability of generic ‘Made To Stock’ stock had risen from 70% to 97% and due-date performance rose from 60% to 80% or better,” says van Rensburg. “They also lowered their initially high stock-holding. By optimising stock on both raw materials and finished goods, they improved both their sales-to-inventory ratio and their finished-goods inventory. Lead times had dropped from 22 days to 10 days for stock items, with ‘Made To Order’ delivery rates dropping to five days for special orders and three days for bespoke items.”
Simulations prove the point
Symphony has been implemented in more than 200 companies in 20 odd countries. In South Africa, CargoSolutions already has many satisfied customers using the system, and they have run simulations in a variety of industries that prove its worth. “In sectors as diverse as minerals, retail clothing, food container manufacturing, hardware, and wine distribution, the simulations all showed that dynamic buffer management of the inventory in supply chains improves profitability – sometimes in ways the client had not even considered,” says van Rensburg. “We run the simulation for a period of one year, tracking the performance of the simulation against actual results achieved by the company running its supply chain as usual. We recently worked with a large wine distributor, and before we started their main concern was stock-outs on popular lines; they weren’t really concerned about overstocking. But remember, this is a cash-to-cash business; they only get their money when they sell the wine. It’s much more cost-effective to make sure your warehouse isn’t full of stock you don’t want or need. Apart from anything else, it frees up working capital that would otherwise be locked up in unsold stock.”
Revealing the actual value of lost sales
“The programme has an algorithm that allows us to put an actual monetary value on sales that are lost due to stock-outs,” van Rensburg continues. “In the wine distributor’s case, they were quite surprised to see that they were losing a lot more sales to stock-outs than they had thought. Using Symphony, they can ensure they have the optimal mix in the warehouse at all times. It lets you see the cost of holding inventory per sale, the amount of inventory held per unit of sale, the amount of stock reduction you can achieve, and helps reduce the sales lost through stock-outs.”
The results speak for themselves – in the case of a food-container manufacturer, the stock-out days in the simulation were 84% lower than the company’s actual results using its current system. Across the board, the simulations resulted in lower levels of inventory – a saving on warehousing costs and a boost to working capital – but still showed increased turnover and a reduction in stock-outs.
*TOC = “Theory of Constraints”