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Rethinking Supply Chains

 Click for a self
guided presentation on Elucidate that explains the 
problems without it, the opportunities it offers and 
the changes required to improve.
Case Study: How Replenishing Inventory by Pulling it thru the Supply Chain increases profits

Elucidate

Is Elucidate Right for You?

Using our Elucidate methodology we can help any company that holds physical inventory significantly increase sales, improve margins, reduce surplus inventory, avoid hassles and lower costs. To determine to what extent this would be true for you, we take you through our Five Steps to Results. The Five Steps ensure a full understanding of how dramatically we can improve your bottom line and cash position.


A Philosophy of Win-Win:  Fees based on Results
We believe so strongly in Elucidate's inventory and supply chain improvement process that we base over 80% of our fees on your results.  We don't like consultants who get paid for recomendations and then, if you complain about the results, point the finger at your implementation.  An engagement with us means you have far more cash and earn much more money than we charge in fees.  Futhermore, our fees are due only after you get the results.  Lastly, we don't bore in and become a permanent expense; we transfer our intellectual capital to you so you own the solution.

IDEA Can Help
Starting in your stores or with your finished goods, we collect consumption data (POS or sales) and feed it into the software portion of Elucidate.  Then, instead of periodic reordering which already consumes too much of the time of your highly skilled and experienced staff, Elucidate replenishes what was consumed.  Instead of ordering your products weeks in advance based on forecasts, you place smaller orders more often based on actual demand. The result: your products are much more likely to be both available for sale and sold at full markup.  Sales and margins increase while you reduce your investment in inventory, producing a flood of cash.


At a Glance
The result of immediate replenishment is the elimination of batching.  The diagram below shows the dramatic change.  It is obvious that the peaks are much lower, reducing inventory.  More importantly, notice that the lows of the on-hand inventory are also higher meaning fewer shortages.  This is only one element of the Elucidate solution.

Inventory Replenishment Chart showing how an inventory pull system is more efficient way of inventory forecasting

Forecasting is the Flaw
There is one certain truth about inventory forecasting - the forecast is always wrong, particularly at the point of use or point of sale.  Forecasts give false confidence that the orders you place will both avoid shortages and cobwebs.  Companies all over the world spend billions every year to get better inventory forecasts.  Has all that money spent on forecasting systems eliminated shortages and surpluses?  The answer is no.  Shortages and surpluses are still a fact of life for companies that hold inventory because of forecasting!

IDEA Removes the Guess Work
With IDEA's Elucidate. you don't rely on forecasts!  Elucidates turns your products into SmartProducts.  Inventory is replenished based entirely on actual demand.  As a product is sold it pulls its replacement throughout the supply chain.  The result is drastically reduced inventory levels, elimination of over stocks and sell outs.  The inevitable consequences are increased sales and margins!

Building a Responsive Supply Chain
Once consumption points are operating according to a demand-based replenishment approach, IDEA moves upstream to regional distribution centers, to central distribution centers, to your vendors or manufacturing plants.  As we go we reduce batching, improve flow and eliminate inventory stagnation.

Changing Thinking to Get Enthusiastic Support
Software alone is insufficient.  The prevailing culture of batching and forecasting does great damage throughout the supply chain.  People are blind to it because they know nothing else.  IDEA changes perceptions.  We show a new way.  We open eyes.  Simply stated, IDEA leads a paradigm shift.  
Elucidate is a responsive replenishment system, which is not dependent on forecast accuracy for success. Instead, it links retail demand directly to the manufacturer, and dynamically adjusts inventory targets according to the actual inventory level.

How Can Elucidate Help Me?
Elucidate increases sales and profits by ensuring customers can buy the products they want, when they want it. Our unique ability to secure availability of our clients’ products, based on consumer demand rather than forecast and scheduling methods, stems from our proven ability to drastically reduce lead times.
Elucidate optimizes the replenishment process by diligently applying Theory of Constraint methodologies. Although it may seem counter intuitive, a beneficial side effect of improved availability is significantly reduced inventory levels. A secondary benefit, therefore, of engaging IDEA is the production of significant cash on your Balance Sheet.

The Opportunity
For one of IDEA’s major clients – a multibillion-dollar international clothing company – IDEA’s first pass at only a small part of the client’s supply chain resulted in finding $8 million dollars of net profits and pulling $42 million out of inventory.
In a subsequent project with this client, IDEA explored further opportunities with top management. The client and IDEA agreed that there was an additional 12% of sales that could drop to the bottom line at a cash equivalent of 8% of sales. For the client, that represented about $300 million of cash flow. Both parties agreed that those numbers would only be possible if IDEA addressed core challenges of their supply chain, not just some symptoms.

The Challenge
The terrible three – inaccurate forecasts, variability of supply and lead times are the Achilles heel of complex supply chains. Throughout the supply chain, there is always too much or too little inventory.
Most companies invest heavily in people to try to control variability with suppliers, production, and transportation to ensure orders arrive on time and in the right quantity.
Forecasts! What’s there to say? They are either too high or too low, and they are actually getting worse due to longer lead times. On that topic, the longer the lead time, the higher level of inventory you must keep on hand and the more diffcult it is to respond to unexpected changes in demand.
It‘s tough to deal with the challenges of the terrible three. Buying better forecasting software is expensive and typically shows little bottom line results. Training suppliers to be reliable is costly and doesn’t last. Trying to shorten lead time usually requires a big investment. There is a better way to overcome the challenges of complex supply chains and IDEA delivers it.

Set Targets
Before IDEA developed a solution, the first thing they did was define what a good solution would look like. So IDEA, in conjunction with its clients and prospects, developed a list of criteria, a sort of measuring stick If you like, to evaluate any suggested solution for a complex supply chain. Six key criteria emerged:

The Result

Following the implementation process, the inventory turns of the case study client doubled while same store sales increased 100% and stayed there. These changes resulted in a bottom line which was 30% of sales. Not every client gets such results; however, IDEA consistently delivers improvements which were previously considered impossible.
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