Liquid Specialty Beverages operates from warehouses located in Coolum and Cairns. Liquid distribute a wide range of over 5500 lines of beer, wine, spirits and mixers to hotels, bars, clubs, restaurants and mines in Queensland and Northern NSW.
Liquid was spending significant and repetitive effort reviewing stock levels and guessing anticipated requirements to place purchase orders for 150 suppliers across 5500 product lines.
Manipulation of purchase orders to meet seasonal and sales surges that are typical with liquor product required considerable effort. Static minimum/maximum levels per product did not work effectively in their dynamic environment and resulted in too much stock being held requiring more warehouse space. Extra administration was required to meet supplier minimum delivery sizes and manage varying lead times and delivery schedules. Planned expansion to Cairns also meant that purchasing effort would effectively double.
The Infoware Solution
We discussed with Liquid Infoware’s alternative approach to purchasing which allows stock requirements to be defined by the number of weeks’ stock on hand. As an alternative to static min/max quantities, Infoware calculates the average weekly sales of each product over a defined period, then determines how many weeks of sales the current stock on hand covers.
Each supplier’s order cycle and lead time combined with minimum and maximum weeks of stock holding plus sales orders, determines if a product is to be ordered. Layer threshold percentages can be defined for required products – e.g. if the order requirement is over 60% of a layer Infoware can then order a layer. This constructs the most cost-effective order for minimising labour when receiving product into the warehouse. If a supplier has a specific minimum order size Infoware tops up the purchase order based on the supplier’s products with the lowest weeks stock on hand.
A weighting can also be defined to increase/decrease requirements to meet seasonal changes.
Specific products can be flagged to be excluded from the weeks of sales purchase order calculations. These items are not usually held in stock and are only ordered specifically to cover customer orders or forecasts.
While past history is a good guide for commonly sold products, how do you handle any special or large expected orders and new customers that are not reflected by past history? Infoware developed a web based customer forecast app that allows sales and customer service staff to enter any anticipated special order requirements including covering new customer needs. This was the missing part in the jigsaw to allow full automatic generation of purchase orders. This accommodates one off event forecasts or recurring forecasts for new customers until they have sufficient history.
The decision was made to let Infoware generate purchase orders based on supplier order cycles early each morning. Staff can review and edit purchase orders until 9:45 each morning then they are automatically emailed to suppliers to ensure timely delivery.
With the addition of the Cairns warehouse, the replication of ordering using Infoware’s purchasing component added minimal purchasing administration. Some products are flagged to be automatically transferred from Coolum warehouse rather than ordered direct from supplier providing better purchasing terms with some suppliers.
Infoware’s intelligent purchasing not only automates the generation of purchase orders but equally importantly is the tool to control stock levels. Stock on hand is now also expressed in weeks of SOH both at item level and also at supplier and branch levels. When combined with customer order fulfillment rates and dead stock levels, this provides all the information required to efficiently balance stock holding levels and available warehouse space.
We realized as our business was expanding we needed to achieve greater levels of efficiency throughout our administration functions, one of those areas was purchasing. Our procurement team worked with Infoware on a practical solution which not only provided historical ordering intelligence but allowed multiple departments to feed demand forecasts into the system. The benefits have not only been realised in labour efficiency but more importantly our order fill rates have dramatically increased without an increase in our days stock on hand. The result - happy customers & happy cash flow