Supply Chain Software: Software that’s in demand from Logility
Inventory optimization is the next focus in the supply chain
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At the end of his Sunday morning news show, Chris Matthews of Hardball fame asks his guests a question: “Tell me something I don’t know.”
Last week, I learned something I didn’t know from Karin Bursa, vice president of marketing at supply chain software maker Logility. Now, I’ve known Logility for years as a provider of warehouse (WMS) and transportation (TMS) management solutions. What I didn’t know is that Logility is also a leading provider of supply chain planning and inventory optimization solutions. Turns out, that’s what the company was built upon. The company was recently one of 14 supply chain planning providers included in Gartner’s Magic Quadrant for process automation.
“Our heritage is demand planning and inventory management,” says Bursa. “TMS and WMS came much later.” With the purchase of Optiant last spring, she adds, “we are one of the only best of breed solution providers to incorporate inventory optimization into our suite.” Logility now counts the likes of Hewlett Packard and Proctor & Gamble among its customer base.
And while Logility once had a strong focus in specialty retail, with customers like Saks, the overall customer profile is changing to include CPG manufacturers in apparel, footwear, food and grocery and durable goods. “Specialty retail is now only 10% of our install base, and warehouse and transportation management are only 20% of our product portfolio,” she says.
Given the company’s focus, what are Logility’s customers looking for today from their supply chain solutions? Bursa offers two important takeaways.
Demand rules: “Companies want to be demand-driven and drive the benefits through the supply chain,” Bursa says. What she means is that many companies have already leaned out their supply chains by taking out labor in their warehouses and factories and by reducing their transportation costs. Inventory management is the next horizon of cost cutting. But it’s not just to reduce inventory, but to understand demand so they have the right inventories for what customers are ordering.
Location rules: This is where multi-echelon inventory optimization comes into play. For years, companies have focused on how much inventory to stock. The next step is to focus on where in the supply chain that inventory should be positioned and in what quantities at each location. After all, there’s not much point in having the right amount of inventory if it’s stocked in the wrong locations, like snow shovels in Atlanta in June and air conditioners in Maine in January. “Traditional demand planning and inventory management helped plan what finished goods should be produced based on expectations of what could be sold,” Bursa says. “With multi-echelon inventory optimization, we can look at finished goods, raw materials and inventory, and positioin those to help a company hit the required service levels.”
Bursa believes that companies can take 20 to 30% of their inventory out of their network, freeing up millions in working capital. “Right now, the biggest untapped opportunity is to truly understand the optimal investments in inventory,” she says. “The benefits are quick. Customers have told us they have seen benefits in weeks and months. Not years.”
That was something I did not know.
About the AuthorBob Trebilcock Bob Trebilcock, editorial director, has covered materials handling, technology, logistics and supply chain topics for nearly 30 years. In addition to Supply Chain Management Review, he is also Executive Editor of Modern Materials Handling. A graduate of Bowling Green State University, Trebilcock lives in Keene, NH. He can be reached at 603-357-0484.
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