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ASCM Insights

Saving Time and Effort with Spare Parts Inventories

title

Challenge: Automate and optimize planning and replenishment for more than 20,000 slow-moving spare parts
Solution: ToolsGroup’s Service Optimizer 99+ (SO99+)
Company: Lubinski
Headquarters: Rishon LeZion, Israel
Operation: Automotive spare parts importer

The challenge

Founded in 1936, Lubinski is Israel’s sole importer of Peugeot and Citroen vehicles and spare parts. For decades, the company enjoyed exclusive arrangements and solid profitability, so decision-makers felt no great urgency to change how they did things. The philosophy was, “If it ain’t broke, don’t fix it.” However, upon closer inspection of its supply chain, some clear opportunities for improvement presented themselves.

 First, Lubinski had been running two parallel approaches to inventory management for its roughly 20,000 stock keeping units (SKUs), 75% of which were slow-moving, long-tail items that represented less than one order line every three months. One planner’s policy was to hold 100 days of inventory for every item. This means that stable, fast-movers such as brake pads were always overstocked. For slow-movers, including hoods and doors, 100 days of inventory could translate to only one or two units. This wasn’t enough to handle demand variations and often required shipping units by air, which was very costly.

The second planner’s approach was to segment the inventory and apply different policies for certain groups of items, such as in ABC classification. However, when dealing with 1,000 replenishment proposals every week, this process was far too complex and time-consuming for the company’s manually intensive legacy systems.

The solution

The prospect of change came when Lubinski completed a two-year transition from its previous enterprise resources planning system to a new technology partner. Rasner Logistics Software convinced the company to integrate Navision with ToolsGroup’s SO99+ inventory planning software and build an advanced system that would be automated and capable of self-learning.

SO99+ focuses on service-level delivery, rather than forecast accuracy. Furthermore, a balance between inventory and customer-service level helps optimize slow-moving parts with sporadic demand. This would enable Lubinski to optimize inventory and lower costs associated with obsolescence, excess safety stocks and expedited air shipments.

Rasner Logistics collaborated with Lubinski’s service and aftermarket team to fine-tune optimal replenishment policies for all SKUs. Fast-moving items now are assigned the highest service levels. Because these are typically used for routine maintenance, their absence damages the company’s service reputation and stands to affect many customers. New items that are less than two years old and have fewer than three sales are assigned slightly lower service levels.

For instance, it’s unknown whether a new car model will succeed or when it will be replaced. If a part hasn’t sold for more than a year, the system can automatically change its status to make-to-order.

The results

By implementing ToolsGroup’s SO99+, Lubinski achieved:

  • 20%-30% lower inventory levels while maintaining 96%-97% service levels
  • About 30% fewer rush air shipments
  • 5 million Euros in first-year savings, attributed to inventory reductions alone
  • Further reductions in inventory write-offs and providing complimentary rental cars

Today, the ToolsGroup planning system is fully automated and self-driving to the point that Lubinski planners almost never need to override the recommended replenishment proposals. It takes only one planner one day a week to handle inventory planning and replenishment, so both planners can now devote their time to more valuable work.

About the Author

Jennifer Storelli

Jennifer Storelli is a freelance writer. She may be contacted through editorial@ascm.org.

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