Success with New System
Bright adds that due to the nature of McPherson's business, it "could have numerous large transactions, say, over a two-day period, moving 150,000 gallons of an item. So an attempt to base decisions on two-day old information was illogical."
McPherson Oil elected to utilize a Windows-based JustEnough analysis tool called Reporting Services. "Some of the software makers offered Citrix-like forecasting spreadsheets, but the one we selected stood out because its dashboards offered flexibility and easy, visual interpretations of sales patterns and inventory changes," Bright explains. "The others regurgitated the data for you but required additional software to allow you to both interpret what the raw data revealed and to create still more management reports."
Today, the dashboards let McPherson pull data up on a screen, easily navigate screens and interpret key performance indicators (KPIs). Planners work with the dashboards as well to take advantage of the unique ability to drill down several levels from the initial dashboard to gain added information.
In the inventory planning module, McPherson can prepare future budgets, construct inventory scenarios and sales strategies. Using the scenario planning feature, planners can tell managers what future inventories will look like throughout the system if certain decisions are made. The tool helps answer forward-looking questions such as:
- How fast can we reach sales goal "A" if acting upon this decision today?
- What's the likelihood of success if we take this direction?
- Could we encounter customer service issues if inventory is kept this low?
Dashboards are accessible to managers at all levels based on needs for specific types of data. For the first time, vice presidents get full visibility into the performance of their areas and various forecasting scenarios. Warehouse managers see site-specific sales volumes, inventories, fill rates and KPIs pertaining to their facility. Company-wide visibility into the future provides not only a glimpse at what is to come but also an ability to dive down at multiple levels to retrieve and evaluate data for decision-making purposes.
Bright says that in 2007 McPherson turned its inventory 6.5 times. By the close of 2008, inventory was turning nine times, an increase of 2.5 turns, and the company was aiming to achieve 12 turns in 2009. "As an inventory-heavy company, that's significant," he says. "Faster turns improve cash flow. They also mean we get paid faster. By turning inventory as much as we do now, we feel a single turn is worth about $150,000 in added revenue to us."
What's more, new efficiencies have enabled the consolidation of eight warehouses into five, resulting in overall operational savings of an additional $2 million. The company also is improving its service levels using more precise communication, Bright says. "Our customer communication is better — involving any issue that could surface."
He concludes: "Integrating the dashboards during 2008 — most of us thought — was akin to buying an axe to do a basic job. Now that we're working more closely with that original axe, something basic is getting sharpened more and more. Now, it's cutting that tree down quite well."