Customer Story

CPG Company Turns to Analysis of Suppliers to Optimize Operations

Problem: Not Enough Information for Accurate Inventory Planning

This CPG company provides food, electronics, clothing, and other goods to its customers. Being able to run analysis on all its suppliers is critical for supply purchasing decisions and the lack of understanding the nuances among its suppliers led to inefficient inventory planning.

The company was basing its supply-purchasing decisions on internal historical models that failed to account for contemporary supply chain issues. They were using Excel, where spreadsheets with historical data were the driving force behind purchasing decisions. The data, however, was extremely siloed, so information such as lead time was separated out from specific supplier data. Historical charts were nonexistent, and much of the decision-making was done based on business intuition rather than on data visualizations that allowed for all the information to be presented collectively. This led to inaccurate planning, as well as supply chain issues further down the chain. The company was:

  • Unable to effectively plan for product shortages based on commodity squeezes.
  • Unable to leverage real-time data in pricing negotiations.
  • Accruing costs associated with lack of optimized inventory, such as inefficient use of shelf space, products expiring and thus leading to sunk costs, or products being understocked at distribution centers, which led to inefficient provisioning of products via out of pattern, or unorthodox shipping channels.
  • Unable to understand direct cost of goods sold (COGS) of all items sitting in inventory.

The company brought Analytics8 in to solve three primary business needs, including warehouse fulfillment accuracy, optimized inventory levels, and root cause analysis so that it can better manage its suppliers and better serve its customers.

Solution: Keeping Score of What Matters Enables Better Decision Making

Working directly with the VP of Purchasing, as well as the Supplier Relationship Management and Purchasing teams, Analytics8 developed a supplier scorecard application that enabled the company to better understand its suppliers and measure key metrics that would derive the most value.

We leveraged a vast array of data sources—from SSAS Cubes, to directly pinging SQL Server Databases, and from Power BI Dataflows. We stitched together supplier information, daily sales and distribution data, inventory data, sales team data, and other related information that was not previously integrated. We then implemented three foundational KPIs—On Time, In Full, and Perfect Order—that would be the driving force behind decision-making for the company. Next, we visualized these KPIs against different dimensions such as Supplier, Products, Year-Month-Week, etc. and developed several visualizations that compared all three KPIs in a supplier scorecard application.

All the KPIs can be visualized across three years of historical data, while ranking supplier performance on scatter plots against each other, as well as displaying supplier performance against their total order count. All of this is possible by filtering on things such as Order Status, Item Description, Supplier Name, and obvious time dimensions that enhance the company’s analysis. We also provided detailed line-by-line delivery information so that the company can pinpoint the exact deliveries in which things went awry, in an export detail page. The data is usually analyzed over months of time, but this granular information allows for the company to specify instances of items not being delivered On Time or In Full.

The application exists within Power BI and procures real-time data which refreshes daily.

Results: Data-Driven Decisions Correct Course in Supply Chain

With the supplier scorecard, the company can now profile suppliers based on relevant information such as product lead time and historical performance against COGS, On Time, In Full, and Perfect Order. This drives for a more equitable supplier scorecard which compares providers of goods on a more even playing field while creating more accurate planning for the thousands of items that go in and out of the company’s Distribution Centers. As a result, the company is better able to:

  • Plan inventory and reduce the frequency of inefficient stock of goods needed to supply its customers.
  • Reduce oversupply which led to lost revenue due to items expiring before they were needed.
  • Understand and mitigate financial risk down to the cent on inventory outstanding by tying COGS to warehouse quantities.
  • Have a deeper understanding of supplier pain points such as commodity shortages. These commodity shortages, for example lead to the company stepping in to help the suppliers provide products when they are unable to, rather than just eating the loss of an item not being delivered. While that has up-front costs associated, it clears up financial loss further down the road.

Rather than spending time trying to manually compile supplier profile information on disparate Excel sheets, all relevant supplier and product information is presented collectively. This leads to not only quicker analysis on purchasing decisions, but also more robust understanding of which suppliers’ Promise Time Windows need to be adjusted. The company also can now leverage price negotiations with real-time data when showing how often suppliers under or oversupply, and the inherent costs associated with those supply chain inefficiencies.

As a result of the implementation of the supplier scorecard solution, the company has realized substantial ROI including:

  • Quantity short reduction of more than $846,000 over 4 months.  By reducing quantity short, the company can ensure there are enough of the correct items in the warehouse when customer orders are fulfilled.
  • Improved on time orders and decreased inventory on hand, which reduced late dollars by $8.4 million. By reducing the number of units that are late, the company avoided issues such as item expiration or order fulfillment issues.

Company Overview

This CPG company provides food, electronics, clothing, and other goods to its customers.

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