Thursday 27th Oct 2016 - Logistics Manager

Elekta cuts inventory costs by £1m

Medical equipment company Elekta has reduced inventory costs by more than £1 million after implementing Inform’s add*ONE Inventory Optimizer software.

The company develops clinical systems for treating cancer and brain disorders, providing resource-efficient technologies that are designed to improve, prolong and save patients’ lives.

Its systems in oncology are used by more than 5,000 hospitals globally and help more than 100,000 patients on a daily basis.

Elekta’s global spares distribution centre is located in Holland and distributes more than 14,000 shipments per year to the American, European and Asia Pacific regions.

The company’s mission was to optimise inventory levels and improve client service, while eliminating high demand fluctuations causing costly disruptions to the supply chain.

As cancer patients rely on a continuous supply of treatments it is imperative that equipment always works, so the availability of Elekta technology is critical, as is the service delivery of spare parts logistics.

Service parts are often needed with little advance warning, so strong inventory management is key to effective service delivery.

Elekta’s core ERP system could not provide the focused information necessary for inventory management to avoid both service disruptions and inconsistencies in availability.

The company needed a system that could better predict the random demand fluctuations the business was experiencing. Due to the high volatility of demand, Elekta was generating surplus stock and impacting the business’ cashflow through storage and insurance costs across its worldwide distribution hubs. 

Mark Purchase, global logistics manager at Elekta Oncology, said: “We run a low-volume but complex operation to install, maintain and support 2,000 sites globally. Because of the mission-critical nature of the parts support operation, we need to ensure all of our customers maintain maximum use of their investment in patient treatment systems.

“Demand for parts is not always predictable, which is why stock levels are kept at a high level, as it’s imperative we are not caught short. However, surpluses of spares tie down capital, so we needed a way to optimise stock levels by location, improve the speed replacement parts are delivered to customers and enhance our demand forecasts and the planning of spares. We needed a technology which met these objectives, was easy to implement, and could also work with other parts of our business, as needed.”

After researching the market, Elekta Oncology, a division within Elekta Group, implemented Inform’s add*ONE Inventory Optimizer, integrating it into its existing Enterprise Resource Planning system.

Purchase added: “We were looking for a solution that not only helped to optimise stock and reduce inventory levels, but which improved our capabilities, response times and service levels. Inform understood this, and provided a configuration of the add*ONE system which met all of these individual requirements.”

Despite the complex nature of the equipment and customers spread across 60 countries, the add*ONE Inventory Optimizer enabled Elekta Oncology to more rapidly forecast demand for spare parts globally and respond to the more extreme movements as soon as they registered as demand.

The team was able to do this because they had access to up-to-date demand data processed overnight, providing a complete overview of the current and projected stock of their whole portfolio, allowing a complete recalculation of the global position in readiness for the next day. Exception-based alerts provided visibility of where inventory could be further optimised and make the immediate supply risks clear to all.

Now, all planners follow a dedicated work flow to move, increase or delay supplies in line with the latest demand pattern.

In addition to the initial quick fix of optimising and reducing spares inventory, Elekta required an improvement in support to the organisation through a standard workflow and process for planners to manage the global spares network more efficiently.
Even though the main project objectives were achieved within the first year, the knock-on effect on supply chain performance achieved within the first few months was unexpected.

A large performance increase in delivery precision was tracked from the first point of introduction and delivered above the targets set.

Purchase added: “What we didn’t anticipate was the immediate impact on the order fulfilment rate, which is now over 99 per cent compared to this year’s global target of 97 per cent. I believe this was due to the visibility from the user interface enabling increased responsiveness to customer requirements.

“This is not a complete surprise as the user interface was a key area in the selection of the Inform system, but I wasn’t prepared for the performance increase of the whole spares fulfilment process, rather than just making the planning process more efficient. It graphically illustrates what happens when the process is laid out for all to see and the forecast updates are available on a nightly basis.”

Since implementing Inform’s add*ONE Inventory Optimizer, Elekta Oncology has seen service levels increase and in-region availability of spare parts has increased to 98 per cent, allowing engineers to resolve customer problems within hours without waiting for re-supply from the global centre.

Purchase said: “The drastic improvement in service performance has seen complaints on availability almost eradicated, falling 90 per cent within the year. This is a real testament to the high standard of the technology we now have in place.
“A year on, we are now working with Inform to utilise the service provided within our system maintenance contract. This will benchmark our progress and propose improvements to our settings, fine tune the system further and squeeze out more benefits.

“We are certainly not using the whole breadth of the add*ONE system yet, but I don’t think we could have adopted all of it on day one. Implementation is as much about changing local practices and beliefs as it is using a new system. We have a plan for continuous improvement and since the system is so flexible and configurable, we can let it grow as our business objectives change and at the pace of our knowledge and the capability of the team.”

Inform has created efficiencies throughout Elekta Oncology’s entire service parts supply chain of 2,500 parts. Each month, more than 1,800 spares orders are processed worldwide for delivery to service engineers, distributors and direct customers. Improved visibility has enabled Elekta to better allocate inventory and reduce global stock levels by eight per cent even as the customer installed base has grown by over five per cent.

Nigel Weston, vice president of supply chain management for Elekta Oncology, said: “The capability Inform provides through add*ONE helps us effectively distribute parts to best support our customers, while optimising inventory levels. This, in turn, reduces spending on new inventory until it is absolutely necessary. We have reduced our slow and obsolete stock by 25 per cent in one year, freeing up cash that we have redeployed into higher levels of critical inventory and allowing an improvement on our overall cash flow.”

Even though levels were lowered, inventory availability is at an all time high of 99 per cent.

Weston added: “We have had terrific results in this area, with reduced transportation costs of approximately ten per cent in the first year alone. The innovations implemented through this project have allowed us to strengthen our relationship with current customers, and expand our support for continued growth with new customers all over the world.”

Elekta is now planning to role out add*ONE to other divisions of the company.