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.

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.

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?

Smarter Inventory Planning at Otto Olsen with IMI

Purchasing Manager Are Saga at Otto Olsen highlights several key improvements achieved after just six months of using IMI’s inventory planning solution:

“We’ve reduced inventory while increasing the service level for the product groups handled by IMI’s inventory planning.
Better control also prevents the build-up of obsolete stock.”

“The system is easy to use for all buyers. Everyone now purchases in the same way — and only through the purchasing department. Product managers determine the assortment.”

“With ABC differentiation — where 20% of the products account for 80% of sales — we can focus on the most critical items that we don’t want to run out of, instead of spending time managing ‘slow movers’ as we did before.”

“Overall, we have much better control. As the person responsible for the department, I know what everyone is doing. Everyone works in the same way, and no product groups are forgotten. I’m convinced the quality of our purchasing is high and aligned with the company’s strategy.”

Saga explains that IMI’s inventory planning system is designed for simplicity and strategic focus:

“It frees up capacity so we can work strategically rather than operationally at the article level.
It’s easier to control the desired service level and stock turnover using the system’s parameter settings.”

The simulation functionality is another appreciated feature:

“We can simulate, for example, how much capital will be tied up if the service level is raised. We see the consequences of our decisions before implementing them.”

Saga notes that the results came quickly, although the system is not yet used across the entire product portfolio:

“For the products where IMI’s solution is in use, the turnover rate has increased to between 3.5 and 4.
As a comparison, it was around 1.5 for the entire warehouse before implementation.”

He also highlights how the simulation tool helps visualize trade-offs:

“It’s an excellent way to show what it will cost in warehouse investment to increase the service level by just a few percent.”

Saga concludes:

“We’re very pleased with the results so far and I’m convinced both efficiency and accuracy will continue to improve as we follow up on more of the KPIs generated by the system.
IMI has also been very responsive and quick to act when we’ve suggested changes — their support has been excellent.”

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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