It is not uncommon for electronics companies, handling specialized equipment and inventory, to experience the constraints of high minimum order quantities and lengthy lead times. However, it is then crucial that these companies prioritize advanced planning and adopt lean inventory practices, factoring in product categories and unforeseen circumstances.
In the case study below, it will become clear how one electronics company failed to prepare for the above accordingly, as they were quickly overwhelmed with issues of lead time delays and understocking during and after the pandemic. It will highlight the importance of demand planning, product prioritization, and how Intuendi leverages these functions within its software.
The Role of Demand Planning
Demand planning involves finding the balance between a company’s supply and demand for a certain product or service, and organizing business operations accordingly.
Demand planning makes use of various forecasting techniques, such as market research, historical data analysis, and inventory management to project accurate figures in terms of sales expectations and inventory quantities.
Despite their upwards trajectory beforehand, an electronics company servicing over 50 branches in the Americas has been experiencing adverse effects in production and product availability due to service issues caused by the pandemic.
During and post-pandemic, major delays were experienced internally, in their own production planning, as well as externally, regarding supplier shipments.
Moreover, the company had introduced a rigorous growth plan, introducing an additional level of difficulties in daily operations. This resulted in incorrect figures, imprecise sales predictions, and thus, sub-par inventory availability.
To address these growing concerns, the electronics company decided that the best investment would be demand forecasting and planning-centered AI technology and software – Intuendi. This company’s collaboration with Intuendi will serve as real-life proof of the importance of accurate demand planning and inventory optimization.
The Power of Intuendi: Key Benefits and Features
The Analysis
After approaching Intuendi, the electronics company was able to identify their predominant areas in need of assistance to maintain a primary position within their field: demand planning and product availability.
After an in-depth ABC analysis was conducted, Intuendi’s team, equipped with advanced knowledge of production planning, provided a solution of AI-powered demand forecasting with a specific focus on historical data analysis and external influencers of demand.
As previously identified, understocking revealed itself to be a notable point of concern for the electronics company, thus informing the decision to place additional focus on inventory optimization. High and slow-moving products were identified, along with overstocking risks.
The Implementation
The second half of 2022 marked the start of the full integration of Intuendi as a daily platform for demand planning and purchase order management of the electronics company.
With a moderately-sized product catalog, Intuendi identified the complexity of the company’s need for purchasing in containers. This indicated the necessity for optimizing container space to help minimize overstock risks and optimize storage for the customer.
The implementation of purchase order suggestions with advanced container space optimization capabilities formed the actionable part of the project, targeting demand planners and purchasing office employees, thus providing a tangible daily demand planning dimension.
The Result
Following the stockout issues of the first half of 2022, the electronics company was advised to invest in inventory to improve the issue of product availability. The sales/inventory value ratio below proves the effectiveness of the inventory optimization process.
An increasing value of this metric, as depicted in the graph, proves that from the second half of 2022, after an initial drop due to the increase in inventory, the business experienced a constantly growing margin and ROI from the inventory investment – a great result!
The inventory value reached a new level in the 2nd quarter of 2023, recording a 29% increase compared to the 2nd quarter of 2022. The business has sustained an increase in revenue, while maintaining, if not although temporarily reducing, the sales/inventory value ratio from 2.15 in the first quarter of 2022, to 1.88 in the second quarter of 2023.
Furthermore, the stockout issues experienced during the first half of 2022 have been reduced by 25% and in particular, in the first semester of 2023 compared to the last 6 months of 2022 by 20%!
Additionally, the electronics company has enjoyed a continued growth of sales volume between the first half of 2022 and the first half of 2023 all while maintaining solid business sustainability.
Measuring the ROI in terms of the profit/inventory value ratio, where profit is equal to sales – COGS (Cost Of Goods Sold), the first half of 2023 saw an 18% improvement when compared to the 2nd half of 2022 – 1.95 vs 1.65, achieved with 12% less inventory value.
Conclusion
Demand planning is a critical factor in organizing business operations, as much of what occurs throughout a company can directly rely upon the findings and projections delivered by the research and analysis phases of demand planning.
The presented case study demonstrates quantifiable evidence of Intuendi’s ability to reduce stockout situations, increase product availability, improve demand planning, and streamline inventory optimization.
The success of the strategy can be attributed to the fruitful collaboration between both parts’ talented teams, and Intuendi’s AI-powered demand planning platform.
