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Elucidate
Elucidate is a responsive replenishment system, which is not dependent on forecast accuracy for success. Instead, it links retail demand directly to the manufacturer, and dynamically adjusts inventory targets according to the actual inventory level.
How Can Elucidate Help Me?
Elucidate increases sales and profits by ensuring customers can buy the products they want, when they want it. Our unique ability to secure availability of our clients’ products, based on consumer demand rather than forecast and scheduling methods, stems from our proven ability to drastically reduce lead times.
Elucidate optimizes the replenishment process by diligently applying Theory of Constraint methodologies. Although it may seem counter intuitive, a beneficial side effect of improved availability is significantly reduced inventory levels. A secondary benefit, therefore, of engaging IDEA is the production of significant cash on your Balance Sheet.
The Opportunity
For one of IDEA’s major clients – a multibillion-dollar international clothing company – IDEA’s first pass at only a small part of the client’s supply chain resulted in finding $8 million dollars of net profits and pulling $42 million out of inventory.
In a subsequent project with this client, IDEA explored further opportunities with top management. The client and IDEA agreed that there was an additional 12% of sales that could drop to the bottom line at a cash equivalent of 8% of sales. For the client, that represented about $300 million of cash flow. Both parties agreed that those numbers would only be possible if IDEA addressed core challenges of their supply chain, not just some symptoms.
The Challenge
The terrible three – inaccurate forecasts, variability of supply and lead times are the Achilles heel of complex supply chains. Throughout the supply chain, there is always too much or too little inventory.
Most companies invest heavily in people to try to control variability with suppliers, production, and transportation to ensure orders arrive on time and in the right quantity.
Forecasts! What’s there to say? They are either too high or too low, and they are actually getting worse due to longer lead times. On that topic, the longer the lead time, the higher level of inventory you must keep on hand and the more diffcult it is to respond to unexpected changes in demand.
It‘s tough to deal with the challenges of the terrible three. Buying better forecasting software is expensive and typically shows little bottom line results. Training suppliers to be reliable is costly and doesn’t last. Trying to shorten lead time usually requires a big investment. There is a better way to overcome the challenges of complex supply chains and IDEA delivers it.
Set Targets
Before IDEA developed a solution, the first thing they did was define what a good solution would look like. So IDEA, in conjunction with its clients and prospects, developed a list of criteria, a sort of measuring stick If you like, to evaluate any suggested solution for a complex supply chain. Six key criteria emerged:
The Result
Following the implementation process, the inventory turns of the case study client doubled while same store sales increased 100% and stayed there. These changes resulted in a bottom line which was 30% of sales. Not every client gets such results; however, IDEA consistently delivers improvements which were previously considered impossible. |
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