Inventory Management: Better Decisions With Business Intelligence

Sept. 14, 2005
Manufacturers such as Pergo Inc. use BI to keep finished goods moving.

For most manufacturers, knowing exactly how much they have on hand of what products and where they are stored is essential. Armed with this information, companies often can make adjustments to satisfy customers, move unwanted or obsolete finished goods before they become a loss and take steps to avoid product shortages.

Unfortunately, for business decision makers, having the facts about inventory at their fingertips is a lot easier said than done. At laminated floor manufacturer Pergo Inc., for instance, the company's IT staff was spending hours struggling to put together inventory reports for managers. "We were putting inventory data into Excel files and generally doing a tremendous amount of preparation of the data before people could use the reports," recalls Barry Daly, senior business analyst at the North Carolina-based firm.

The downsides of late or inaccurate inventory information data are higher carrying costs, write-offs and missed sales opportunities. "There's a lot of product that can get caught and expire while sitting in a customs broker's warehouse somewhere," says Eric Piersol, global MIS projects manager at Alltech, a $300 million manufacturer of additives for pet and human food. "You can saddle yourself with a huge expensive surplus because somebody wasn't watching."

Of course, the business need for realtime or even daily inventory data varies from industry to industry. Products that expire, such as pharmaceuticals or consumer package goods, tend to require more intensive inventory management. "In the CPG industry, the realtime communication of inventory information is very, very important," observes Roddy Martin, vice president of the CPG and life sciences industry strategies at AMR Research in Boston.

Earlier this year Pergo began using a business intelligence (BI) system from Swedish software firm QlikTech called QlikView to track product levels at five warehouses.

"In the past, only operations people had access to inventory data, but with this new system, we've been able to extend this information to our field staff," says Bill Lloyd, enterprise intelligence manager. Before the new system went live last year, sales staff who wanted to find out about inventory levels had to place a call to a planning manager. Now they can check stock levels to see, for instance, which products are to be phased out. "This gives the sales staff the opportunity to be more aggressive in getting rid of old inventory," Daly says.

Using Vanguard Solutions' BI package, Alltech, which operates 13 plants worldwide, is able to refresh its inventory data for all offices, presenting each with a particular local or regional view using an information filter.

"By being able to see what lots will be expiring every 30, 60 or 90 days, our regional and country managers can do something with this product before it expires," Piersol says.

The BI system also helps local and regional sales managers be more agile in meeting customer demand. Says Piersol, "If a customer in France tells the sales manager he needs 50,000 kilos of product by next Wednesday, but France doesn't have sufficient inventory, he can see in just a few minutes on this system that Germany has the 50,000 kilos of product."

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