otto olsen

IMI Supply Chain Solutions

OPTIMIZED THE STORAGE AT OTTO OLSEN

”Six people control the inventory levels with a focus on better profitability, increased inventory turnover speed and the highest possible level of service to customers. Read the article in Logistics & Management about Otto Olsen and the inventory planning from IMI.”

 

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Otto Olsen

THE PROBLEM

Otto Olsen is one of Norway’s largest suppliers of technical products. Are Saga is the head of a department of six people that manages inventories with a focus on improved profitability, increased sales and the highest possible level of service to customers. For a long time, this was handled manually, using manually determined min and max points in Jeeves and the use of Excel.

– The min- and max-points that we set up were static and true that day, but not the next day, says Saga.

Lack of opportunities for differentiation of important and less important products and a high probability of high inventory values and a low level of service with sold-out products were some of the reasons for Otto Olsen’s decision to acquire a professional purchasing and forecasting system.

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THE SOLUTION

The simple is often the best. Are Saga says that they chose to run the purchasing project on their own and established an internal working group that evaluated three different systems. The motto for the project was ”the simple is often the best”. The system would therefore have a user interface that was easy to both understand and use, in addition to giving Otto Olsen fast results in service level and inventory reduction with less obsolescence. And of course, the investment would have a fast payback rate.

During the autumn of 2018, the choice fell on IMI’s inventory planning – a special system for forecasting and product flows that has been developed in close collaboration with Lund University.

– It was precisely the simplicity of the system that we fell for, says Saga. It’s easy to understand, what you see is what you read and you do not have to deal with complicated formulas.

The system calculates forecasts for future sales and takes into account both seasonal variations and promotions. The forecasts are used for order proposals, which are sorted by supplier and presented in a way that is simple and rational for buyers to work with.

– Simplicity means that you free up the capacity to work strategically and not down to the article level, Are Saga continues.

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The challenges

  • Manual Inventory Management: Inventory was managed manually, using static min/max points in their ERP system and Excel spreadsheets.
  • No Product Differentiation: There was no way to differentiate between important and less important products, making it difficult to prioritize stock.
  • Need for Automation: The absence of an automated solution made it challenging to optimize the purchasing process, impacting profitability and sales growth.
  • Low Service Levels: Stockouts were common, resulting in a low level of service and dissatisfaction among customers.
Recognizing the challenges?

THE VALUE IMI'S INVENTORY PLANNING ADDS

Purchasing Manager Are Saga at Otto Olsen highlights the following improvements that IMI’s inventory planning has contributed to after only six months of operation:

Reduced inventory with increased service level for the product groups handled by the inventory planning from IMI. Better handling that prevents the build-up of obsolescence.

Easy to use for all buyers.

Purchasers make their purchases in the same way, and purchases are made only from the purchasing department. The product managers determine the range.

ABC differentiation, where 20% of the goods account for 80% of the sales, makes it easier to handle the most important goods that we would rather not run out of – this instead of spending a lot of time handling ”slow movers” as we did earlier.

Generally better control. As the person in charge of the department, I know what everyone does, everyone works in the same way and no goods or product groups are forgotten. I am convinced that the quality of the purchases is high and that they are in line with the company’s strategy.

With its simplicity, the inventory planning from IMI frees up capacity to work strategically instead of operationally at the article number level as we did before. It is easier to control the desired level of service and turnover on the inventory, which can be easily done with the help of parameter setting in the program.

Simulation possibilities, for example what it will cost in capital tied up if the level of service is raised from one level to another. We see the consequences of decisions before they are implemented.

Saga says that the results of inventory planning from IMI turned out quickly, but that there is still a lot to pick up. For various reasons, the system is still not used for the entire portfolio, but for the products where it is used, the turnover rate has increased to between 3.5 and 4. As a comparison, it was around 1.5 for the entire warehouse before the inventory planning from IMI began to be used.

The simulation function in IMI’s inventory planning is also a very good tool to show, among other things, what it will cost in warehouse construction to increase the service level by a couple of percent.

Are is very pleased with what has already been achieved and is convinced that both efficiency and accuracy will be further improved when he follows up on several of the KPIs generated by the system.

Finally, he adds that so far they have been very satisfied with the supplier in terms of general support, and that they have also been responsive and reacted quickly when Otto Olsen has come up with proposals for changes.

The benefits

  • Inventory optimization: Reduced inventory levels while improving service levels for product groups managed by IMI's inventory planning, minimizing the risk of obsolescence.
  • Improved control: Department heads have clear visibility into all purchasing activities, ensuring alignment with company strategy.
  • Support & responsiveness: The IMI team provides excellent support and responds quickly to feedback, ensuring a smooth collaboration.
  • Simulation capabilities: Ability to simulate the financial impact of decisions, such as capital tied up when increasing service levels, before implementation.
  • Turnover rate increase: For product lines managed by IMI's inventory planning, turnover rates have improved from 1.5 to 3.5-4 in six months.
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