Wednesday 26th Oct 2016 - Logistics Manager

Inventory optimiser gives big savings for motor distributor

A new inventory optimisation system from Inform has enabled motor distributor Autosdistribution Losch to cut its investment in stock from 3.4 million euros to 2 million euros in a period of six months.

Losch supplies 22 dealerships in Luxembourg with original parts and accessories for Volkswagen, Audi, Seat and Skoda. Its product range of 900,000 parts and accessories is sourced predominantly from Volkswagen’s European central warehouse in Kassel each night. The Skoda and Seat parts are imported from the Czech Republic and Spain respectively. The 25,000 standard parts that Losch deals in equates to 90 per cent of the company’s annual turnover, 20 million Euros.

For almost 30 years, Losch managed its inventory through a system from Volkswagen, which processed data from the in-house ERP system. Volkswagen was designing new models for the large markets, such as Germany, France, or Italy, where Volkswagen itself supplies up to 700 dealerships. However, the independent importers for the smaller markets such as Luxembourg could not afford to introduce these new models.

Harald Fleck, manager for the spare parts and accessories department at Autosdistribution Losch, said: “With our old system, it took at least three months for us to identify sales trends, which was far too late. We needed to have a better understanding of our immediate stock needs and consequently had ongoing problems with managing our warehouse stock. Additionally, the costs for storage and express deliveries had reached a level which was no longer justifiable.”

Seven providers of inventory optimisation systems answered to the tender developed by Losch in cooperation with the Fraunhofer Institute for Material Flow and Logistics in Dortmund, Germany. Inform and two other candidates were shortlisted and invited to Luxembourg. Fleck comments: “Inform was the only provider who responded to all elements of the tender request with a very cost-effective solution. After a comprehensive review, we were fully satisfied that the add*ONE Inventory Optimiser was the only product on offer that would address all of our needs. The foundation for our collaboration was laid.”

The Inform team needed to extract data from the old system to begin stock optimisation with the add*ONE solution. Early on in this process, the team was able to identify areas requiring improvement, which led to the project team developing some fine adjustments to the solution during a workshop in Aachen organised by INFORM. Fleck said: “add*ONE offers far more than just replenishment, but unfortunately due to the size of our warehouse, we don’t have the opportunity or capacity to fully explore all the features. However, the new system is more than adequate to fulfil our needs as an importer in a small market.”

Since implementation, the quantity of ordered items has been reduced from 23,000 to 19,500. At the same time, the stock value declined from 3.4 million to nearly 2 million Euros.

Additionally, the service level improved for the dealerships and is running at 96 per cent, reaching the targets set by Volkswagen.

For each of the four automotive brands at Losch, there is only one employee responsible for the overall workflow in original parts and accessories – spanning across purchasing, promotions and sales. The automation of the planning process has led to a simplified way of working.

Fleck said: “Expensive overnight express deliveries of standard parts are a thing of the past.” Planners now receive cost-optimised high volume order recommendations. These orders are then delivered on a daily basis. This is more cost-effective and shortens delivery lead times to a maximum of one day, whereas in the past it could take up to eight days.