Saddled with an ecommerce system that sent a high volume of individual orders from distributors to its warehouse, electrical equipment manufacturer nVent Electric plc sought to break free of these shipping inefficiencies.
“We wasted a lot of money on freight by shipping orders to distributors as the orders came in,” says Kirsten Gilmer, senior analyst and program specialist for the vendor managed inventory program at nVent. “This meant a lot of our product was being hauled in half-empty trucks and that increased the odds of a load shifting, resulting in damaged product. We knew what we had to do, but we didn’t know the best way to go about it.” NVent is a global supplier of equipment designed to protect, connect and manage heat in critical electronics, communication, control and power equipment through such brands as Hoffman and Schroff.
The answer, nVent decided, was obtaining greater visibility into its distributors’ inventory levels to anticipate the inventory they needed in advance of ordering. The company deployed the TrueCommerce Datalliance Vendor Managed Inventory (VMI) platform from True Commerce Inc.
Manufacturer and distributor cloud connections
The cloud-based, software-as-a-service platform connects inventory and product data between a manufacturer and its distributors. Using performance metrics such as service levels and day-of-supply, the VMI platform recommends to distributors how much product should be ordered and when.
“Before VMI, we didn’t know how much inventory a distributor had,” says Gilmer. “Our distributors were used to ordering several times a week, which meant filling those orders as they came in.”
In many cases, distributors were placing orders for items as they went out of stock, or were about to, which put them at risk of losing sales. With TruCommerce Datalliance VMI, nVent can see every SKU in its distributors’ warehouses. “It’s like being inside a distributor’s warehouse and helping them order the inventory they need,” Gilmer says.
Having visibility into its distributors’ inventory helps nVent coordinate orders to avoid stockouts. Since installing its VMI platform, nVent’s distributors have reduced stockouts by 40%, Gilmer says. “With visibility in distributors’ inventory, we know how much time we have before a distributor runs out of product,” Gilmer adds.
Fixing stockouts, spiking sales
In addition, nVent reduced the number of stockouts and boosted sales, as data from 61 of nVent’s distributor locations showed item availability increased 16% and sales 28%.
NVent, which deployed its VMI platform in 2010, manages 40 distributors with 185 locations. The manufacturer supports several brands of electrical equipment including Caddy, Erico, Hoffman, Raychem, Schroff and Tracer.
Improved ordering has also made shipping more efficient as trucks are typically filled to capacity. Full trucks reduce the risk of merchandise shifting during transit, which can lead to damaged goods and returned items, Gilmer adds.
Besides filling trucks to the brim that deliver to a single distributor, Gilmer says the inventory information provided by its VMI platform has opened the door to a new, cost-efficient shipping model for smaller orders. Orders too small to fill a truck are now grouped by geographic region to fill the truck. The orders are then delivered over several days to each distributor in the region, Gilmer says. Distributors can view the expected date of shipment through the VMI platform.
Saving on expenses with full truckloads
“This is a real cost savings for shipping orders that are too small to fill a truck,” Gilmer says.
In addition to bringing greater efficiencies to its ordering process, nVent’s VMI platform helps identify which products aren’t selling for a distributor and which are selling so rapidly the distributor may need an early reminder to stock up on that product.
After identifying items that aren’t selling, nVent can send a message to a distributor recommending it decrease its stock of the item by returning a portion of it. Distributors are not charged for returning excess items and they can return excess items up to four times a year, Gilmer says.
Conversely, nVent can make earlier than normal recommendations to stock up on hot selling items in advance of a warehouse shuts down, for instance. nVent has a warehouse in New Mexico that shuts down during the Christmas season, which impacts product availability at the end of the year.
“Getting this kind of data through our VMI Platform gives us more perspective on what’s happening with our distributors so we can help them get ahead of inventory issues,” Gilmer says.
Peter Lucas is a Highland Park, Illinois-based freelance journalist covering business and technology.
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