It’s something of a culture shock for a wholesale/distributor: to let go of years of instinct and experience to rely increasingly on smart algorithms for the procurement and storage of your goods. Yet Den Bosch-based NEDIS have taken this ground-breaking step. The buyers’ expertise still plays an important role, but most of the ordering process is now automated. CQM developed the intelligent inventory management system.
Over the last 30 years, wholesaler and distributor NEDIS has developed into one of Europe's market leaders in the area of consumer electronics and accessories. The former family business has since 2012 been part of the publicly-listed Swiss Dätwyler Group. NEDIS supplies some 15,000 products under its own and 3rd party brands to over 50,000 retailers and e-tailers in more than 50 countries. The company tagline is ‘NEDIS gives you selling power’. This refers to the fact that besides being able to offer the reseller an attractive margin, NEDIS can also always supply the products from stock. NEDIS never wants to have to disappoint its clients; so though most items are purchased from Asian producers sometimes with months-long lead times, those same items can be delivered by NEDIS next day to its resellers or their customers. The key question is: how do you maintain a healthy stock while achieving optimum utilization of warehouse space and ordering process efficiency, and minimum assortment costs?
Central and uniform
The acquisition by Dätwyler was the trigger for NEDIS to centralize its procurement process. Previously, this had been spread across thirteen European countries. Now NEDIS has one large warehouse in Den Bosch, where all procurement is also carried out. "We’d discussed integrated supply chain optimization with NEDIS before," explains CQM consultant, Maike op het Veld. "But at the time, it was a bridge too far. A lot of data wasn’t available and with NEDIS we decided to first focus on optimal inventory management."
CQM began by developing an application with advanced algorithms for uniform procurement forecasting and inventory management. The application links up with the NEDIS management system and has a user-friendly interface to better support the buyers. "The application signalled a cultural shift within NEDIS,” argues Maike. “No longer were just purchase price and availability of products taken into account, but also optimal utilization of warehouse space and capital requirements. It’s not difficult to always have your complete assortment in stock in large quantities. The challenge is to have each item in stock in exactly the right quantities. So you get maximum return on both your warehouse space and the cost of maintaining inventory. Because a product sitting on a shelf also costs you money.”
Green, orange, red
The procurement application went live in 2014. Based on product groups, suppliers’ delivery times, procurement volumes and the various other relevant procurement rules, a system was developed where NEDIS' buyers can order products at the right time in the right quantities from the right suppliers. While still guaranteeing delivery reliability for NEDIS’ resellers, and optimizing the whole process in terms of cost, warehouse space and efficiency. A vital component is how the application automatically advises buyers using a three-colour code — Green: no action needed, ready to order; Orange: quick check required; Red (or 'attention list'): buyer to check – there’s an issue requiring your attention.
John Laurijsen, NEDIS’ senior purchaser, worked intensively with CQM: "It’s a fine system that we are now going to continue optimizing together in the field. We want to know why the application gives certain ordering advice that sometimes goes against the 'gut feeling' of our purchasers. Face-to-face sessions with CQM help us understand that advice and, where necessary, adjust parameters or algorithms. These sessions boost the understanding on both sides."
Jack Breukers, Head of Operations & IT at NEDIS, agrees that ‘trust’ is the key word for the culture change now underway at the company. "Our starting point is not having to say no to our customers, while still having a healthy stock in terms of optimized space and capital requirements. The application helps us achieve this. Moreover, we now operate in a single, uniform manner. Now we need our buyers to trust the advice the application gives, so that in the near future we can simply order most of our assortment from the green list. This obviously takes time and fine-tuning. But if everyone sees that the system works, that trust follows automatically. And after all, the system is always run by people. So we’re moving from gut feelings to calculated procurement. We’re taking a genuinely ground-breaking step, but that’s something that at NEDIS we’ve never shied away from doing.”