Improving Service Levels, Reducing Inventories at Castrol and Repsol

Downstream processors using optimization solution from ToolsGroup to limit urgent production runs, operate leaner supply chains

Downstream processors using optimization solution from ToolsGroup to limit urgent production runs, operate leaner supply chains

Boston — June 15, 2005 — Manufacturers Repsol and Castrol are using an inventory optimization solution from ToolsGroup to limit urgent production runs and operate leaner, more efficient supply chains, helping to reduce finished product and component inventories, and achieve near-perfect customer service levels, according to an announcement this week from the solution provider.

The two companies are using ToolsGroup's DPM solution to increase service levels and decrease inventory throughout the supply chain, the enabler said.

ToolsGroup provides inventory optimization software solutions for distribution-intensive businesses. The enabler says its stochastic solution optimizes distribution chain inventory, from finished goods assembly to the end consumer, and from strategic network design to daily operations, allowing supply chain managers to meet demanding service levels, while reducing inventory and operating costs.

At Castrol, the company has been so pleased with the results of its DPM deployment that it has rolled the solution out worldwide across all its business units. Repsol has also added more divisions after its initial success, now covering the lubricants, paraffins, by-products and sulphates, and asphalts divisions.

Castrol Targets Supply Chain Uncertainty

Castrol was one of the first companies in its industry to employ ToolsGroup's stochastic modeling technology to manage the uncertainty in the supply chain. Many companies try to reduce supply chain uncertainty by improving forecast accuracy. Castrol realized that in order to deliver very high service levels with optimal inventory levels it also needed to properly manage the natural uncertainty in the supply chain.

The company built a system that employs stochastic modeling techniques to accurately measure demand and supply chain volatility, and accurately set inventory targets required to accommodate the volatility. The resulting system has allowed Castrol to deliver extremely high customer service levels, despite a complex, multi-echelon distribution network.

The Castrol project team reduced total network inventories by 35 percent, 20 percent in the first year after implementation and then 20 percent again in the following year. Despite the lower inventories, service levels to customers — defined by line-fill rates — are up by 9 percent overall.

Repsol Improves Service Levels, Lowers Inventory

A $42 billion company, Repsol is a manufacturer and distributor of lubricants, asphalts and byproducts. Repsol is headquartered in Spain. The company recognized that to remain the leader in an extremely competitive and congested industry, it had to improve order line-fill rates and decrease inventories.

In the first phase of its project with ToolsGroup, for the lubricants and paraffins divisions, Repsol was able to improve service levels from below 90 percent to 97 percent, while simultaneously reducing stock by 16 percent.

In addition, DPM enabled the company to maintain an optimal global service policy, and provided the ability to model alternatives with a reliable estimate of the cost required to fulfill any specified global service objective.

Other goals for the project were a fast and seamless integration with the company's SAP enterprise resource planning (ERP) system, efficient replenishment of its nine secondary warehouses from the central warehouse, and precise input for manufacturing planning.

Several other large oil and lubricant companies in North America and Europe, representing more than $400 billion in sales and more than 57,000 retail sites, are also now employing ToolsGroup software to strategically position inventory in their multi-echelon supply chains, according to the solution provider. In all, ToolsGroup claims more than 80 customers in 28 countries.

Additional Articles of Interest

— Do you only dream of having a supply chain as efficient as Dell's? Then it's time to wake up and manage your inventory liability. To find out how, read the article "Managing Inventory Liability in an Outsourced Relationship."

— For an in-depth look at how agribusiness Syngenta is reducing inventory while maintaining customer service levels by building a demand planning process based on a collaborative forecasting solution, see the article " Forecasting Processes from the Ground Up ."

— Demand planners at glove manufacturer Wells Lamont have put their finger on a way to bring new value to the company by leveraging technology that allows them to plan by exception. Read their story in the article " Planning by Exception," in the December 2004/January 2005 issue of Supply & Demand Chain Executive.
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