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serve the needs of specific customers and markets to achieve bet- ter economies of scale. One warehouse is now specifically geared towards global electronics while the other is tailored to cater for European customers.


Anne Bruggink explains, “The Site Specialisation project is an example of a project that moved ahead as a direct consequence of necessity and it forced us to abandon old-fashioned thinking. This one really delivered. In our plans we calculated a payback time of 15 months but it took only eight months so we completed it nearly 50 per cent faster; it’s saving us millions of pounds a year and crucially, it’s improving our customer service. ”


Planning chaos during the rebound


When the sales orders bounced back from a 17 per cent decline to 25 per cent growth, the company’s supply chain really came under pressure. During this phase, demand for some products increased by as much as 75 per cent, while others were down by 25 per cent. Therefore looking in the rear view mirror for plan- ning insight was not only pointless, but counterproductive. The supplier flexibility gained during the downturn hardened and lead times grew from two to 52 weeks in some cases. The con- tinuing uncertainty made the sales staff even more nervous and other staff had to put in many hours of overtime to cope with unforecasted inbound deliveries and outbound picking, packing and shipping.


As Bruggink explains, managing through the rebound was much more difficult than the downturn itself: “During the down- turn, despite low morale, cash flow concerns and plummeting demand, there were actually some things working in our favour. In normal circumstances, for example, it’s very difficult to expe- dite products, but in the downturn everyone wants to sell so we were able to negotiate very short lead times. This helped keep our service levels very high.


Believing in forecasting


All the uncertainty during the recovery sent costs and stress lev- els skywards, but it also provided the impetus for changing the companies forecasting processes and tools. Before the recession, Electrocomponents’ planners, like most in the industry, had reached the conclusion that forecasting was so unreliable that it was pointless. It took a recession combined with a strategic push on new product introduction to make Elec- trocomponents realise that not bothering to forecast was hurting the company. “The whole world was saying that we can’t forecast this business. We turned around and said, ‘ok, but let’s try!’” says Bruggink.


Drawing on many years of supply chain experience and research his approach was to use a software tool to generate the best pos- sible draft forecast and then ask sales, product marketing and


finance people to improve upon it. “In my experience sales peo- ple are naturally too optimistic when it comes to developing fore- casts and finance people too pessimistic – but they are both very good at adjusting existing forecasts to make them more accurate. Tools and people need to work together,” he says. Before the company started to evaluate new software tools, Elec- trocomponents also reviewed the processes related to optimising service delivery and costs. The conventional approach is to imple- ment a Sales and Operations Planning (S&OP) process but that omits inventory management which is so critical to the business. Bruggink explains, “Inventory is not waste, unwanted or an acci- dent in our business – it is fundamental to our business model as a distributor.” To address the need to manage inventory in the planning pro- cess, Electrocomponents opted to implement Sales, Inventory and Operations Planning (SIOP) software. This was conceived to improve agility and performance for supply chain businesses subject to high volatility.


Electrocomponents also introduced


a concept established by supply chain academics in 2005 called ‘value density’ which involves segmenting inventory and deter- mining how it is treated based on its properties, such as value, weight, order frequency and how quickly it needs to arrive with the customer.


Utilising its local warehousing infrastructure, Electrocomponents stores products of low value density, such as waste bins, locally to the customer and transports them by road or sea. Products of high value density, such as electronics, are stored either centrally in the UK or locally and transported quickly, by air if necessary, to maintain the company’s high ser- vice levels.


Selecting a reliable forecasting tool


These new processes and the scale and complexity of the compa- ny’s product range called for highly specialised demand planning software to support forecasting. Its incumbent software Manu- gistics, though suitable for order management, was not designed to forecast its high percentage of ‘long tail, slow-moving’ cus-


ELECTROCOMPONENTS BY NUMBERS


1.6 million customers worldwide; £1.18 billion in revenue; Operations in 32 countries and 17 warehouses; 2500 suppliers, 5800 employees, 2400 people in the supply chain; Distributes 550,000 products ranging from semiconductors and optoelectronics to power tools and protective clothing; Availability greater than 96.3%; Average order value (AOV) is around £140; More than 46,000 parcels shipped on the same day the orders are received.


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SUPPLY CHAIN MOVEMENT, No. 1, Q1 2012


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