Inventory and Purchasing Optimization:

Summits Journey to Increasing Customer Service Levels

Saleem Tajuddin
Summit Electric Supply
SESSION CODE: WD662

Who is Summit?
Electrical Distributor with 30 branches in Texas,
Louisiana, Arizona, and New Mexico.
Revenues approx. $500M with 500 employees.
Went live with SAP in 2007
On ECC 6.0

Had previously optimized purchasing using own Load

Builder solution in SAP.
Implemented GAINS last year to optimize Inventory
and Purchasing processes.

Survival in Business Jungle

Customer is King
Our survival and profitability depends on how happy we keep our
customers, and how we go about doing it, differentiates us, and
makes us unique.

Key Learning Points

Why augment our SAP ERP with GAINS

General Adaptive INventory System
Implementation Steps
GAINS Portal Dashboard
Demand Planning Kicking Forecasting up a
notch
Inventory and Replenishment Optimization
Increasing Customer Service Levels

Why Augment SAP with GAINS

BG Before GAINS

AG After GAINS

Clipping Consumption

Raw historical data

Monthly Forecasting

Dynamic Forecasting

Monthly ABC

Dynamic ABC classification

Monthly LT updates

Dynamic LT Updates

Load Build with ROP and Vendor

ARO suggestions with Vendor and STO in

Constraints

Manual process for sharing slow/dead

inventory

Stocking based on ROP and Vendor

constraints

parallel

Automated process for inventory sharing

Stocking policy and Inventory parameters

based on optimizing Total Annual Cost

GAINS Implementation
Implementation Steps:
EEP: Executive
Evaluation Process

IIPSE: Inventory
Investment Profit and
Service Evaluation

Project Kickoff

Data Mapping
Hardware/Network

Data Extracts

Inbound data from

SAP

GAINS Server

Outbound data to
SAP

IIPSE: Inventory Investment, Profit and Service Evaluation

Study with real time data to determine the current state of supply chain,
and financial impact of implementing GAINS.
Summit Business objectives:
Reduce inventory related working capital while:

- Maintaining &/or improving pre-expedite Service Levels

- Reducing receiving & expediting activities

IIPSE: Inventory Investment, Profit and Service Evaluation

Improve planning and efficiency through more automated processes such as:
- Forecasting : Dynamically generate Monthly/Weekly/As needed Forecasts for all
planned SKULs [SKUs at a location].
- Inventory policy: Optimize inventory for each stocking SKUL, minimize dead and
slow movers, generate ABC classes for each SKUL, calculate Service Levels,

calculate and populate ROP field in SAP

- Multi-echelon planning: Parent/Child location relationships

- Replenishment planning: Approved GAINS Replenishment Orders [AROs] to

automatically create POs or STOs
Improve Customer Service Levels

IIPSE Results
Projected an average 30% inventory savings through decrease
in inventory for active items.

Significant Carrying Cost reduction through inventory

reductions.
Receiving Cost reductions due to selectively increased order
quantities for low cost or high average inventory items.
Surplus/Obsolescence reductions via dynamic and trending
inventory policy.

Increased productivity through reliable exception based

planning.
Proactive inventory sharing [when profitable] between Plants.

Data Mapping and Flow

Inbound to GAINS

Outbound to SAP

Key fields mapped to GAINS

GAINS approved AROs become

POs/STOs

Nightly extracts from SAP:

Full Item/Material Master
Demand
Supply
Vendor
Vendor Returns
Near Real Time Extracts for
changes
Material Master
Demand

Forecasts Monthly, Weekly,

Nightly, User initiated- update
ROP
Safety Stock
ABC Classification
Lead Time

Service Levels

Inbound Data Flows

Outbound Data Flows

GAINS Forecast Models

GAINS Forecasting Analysis

(Mature, Active Items)

GAINS Portal

Demand Planning Forecast Review

Replenishment Planning Vendor Review

Replenishment Planning Transfer Review

GAINS Inventory Policy Analysis

BEST PRACTICES Lessons Learned

Set Realistic Goals: Timeline, Service Levels, etc.
Get Business Users involved during implementation
process.

Return on Investment Purchasing

Relevant item data

on single screen

Purchasing
Efficiency
1) 4-6 man
hours/day
2) 20% reduction
in department

Prioritized buy list

by Vendor or stock
transfer by Plant

Flexible
procurement
settings Faster
issuance of
POs/STOs

Return on Investment - Inventory

Dead/Slow
Moving
Inventory
Visibility
Demand
Planning with
Optimizing Total
Annual Cost

Vendor and
Stock Transfer
buy list in
parallel

8-10%
Reduction in
Inventory
Costs

Return on Investment

Customer Service Level

Purchasing
Efficiencies

Inventory
Optimization

Customer Service
Level % increased
from 92% to 99%

KEY LEARNINGS - Summary

20% reduction in staff. Able to manage larger workload in
spite of increase in # of Plants. Increased Buyer/Planner
efficiency.
Better utilization of dead and slow moving stock via
automated Stock Transfer suggestions.
Inventory reduction/optimization stocking materials
based on Total Annual Cost.

Increase Service Levels of A [Stock] items from 92% to

99%. Reduction in material stock outs.

Increased Customer Service Levels =

Customer Satisfaction = Customer Loyalty

STAY INFORMED
Follow the ASUGNews team:
Tom Wailgum: @twailgum

Chris Kanaracus: @chriskanaracus

Craig Powers: @Powers_ASUG

THANK YOU FOR PARTICIPATING

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