What is it that the ICS system does?
The ICS system is an inventory management system that produces future demand forecasts individually for every stocked product and at every stocking location. The system also calculates the required stock levels per product and per location and recommends purchase orders or stock transfers on a daily, weekly or monthly basis to maintain the calculated stock levels across the network in accordance with the purchasing policy.
It is simultaneously a scenario modelling business intelligence tool as well as a stock management operating system.
The outcomes that are delivered by the system are many but the key ones are improved stockturn and safeguarded customer service levels.
How is ICS different from other similar systems?
In broad terms, most inventory management systems tend to be based on “error-based” methodologies. In this respect the ICS system is different in that it is founded on a “risk-based” methodology.
Most of the alternatives to ICS employ “error-based” methodologies. In this context “error-based” refers to technologies that employ frequency distributions of plan versus actual errors, often using absolute values. Here the direction of the error is ignored.
In contrast, the ICS system employs both investment management and risk management principles. Its goal is to establish for the client a risk / investment balanced inventory portfolio, that delivers the required customer service outcomes while optimizing stockturns.
Here the risk-based methodology is very concerned with the directional propensity of the occurring errors. For example, over-forecasting is not risky for customer service, but under-forecasting is risky.
The differences between these two methodology approaches leads to fundamentally divergent inventory management solutions and usually very different inventory outcomes
Why is so much emphasis placed on safety stock?
It often comes as a surprise to management to discover that usually more than 50% of their stock investments for stocked products are in safety stocks, or buffer stocks as they are sometimes called.
These safety or buffer stocks exist for the purpose of delivering customer service in the face of inaccurate demand forecasts and / or unreliable supply from product vendors. These two conditions can be thought of as demand risk and supply risk respectively and they will require extra just-in-case stock to be carried if customer service is to be safeguarded.
When safety stocks are set inappropriately for the demand and supply risks two resulting conditions usually manifest themselves, namely, too little stock leading to lost sales or too much stock leading to costly stock quitting actions.
Safety stock settings have an overriding and direct impact on customer service as well as on over-stock conditions.
Their impact cannot be overestimated. Here is where the unique actuarial risk models for safety stock settings in the ICS system come to the rescue.
How far into the future does the system simulate?
It is usual for the ICS system to do granular inventory modelling for 24 months into the future. Longer planning horizons, too, can be modelled if needed.
All of these inventory models and projections are done by line-item by location and by day into the future.
Such detailed granular data is usually also aggregated into consolidated models using various classification criteria, e.g. by product group, by location, by business unit, etc.
What data does the system need?
In addition to the usual product master file information describing the product and its supply chain particulars, the ICS system needs daily external data feeds from the ERP system. These data feeds relate to the daily sales, daily stock movements, daily purchase orders placed and daily opening stock positions.
These daily data feeds are automated in a batch process that usually runs in the very early hours of the morning.
Does the system replace our existing ERP system?
No, the ICS system is a business intelligence and planning system and does not offer all of the functionalities of an ERP system. It does however rely on an ERP system to provide it with its daily data downloads.
The ICS system, however, is agnostic as far as the identity or name of the ERP system is concerned. It will interface with most, if not all, of the reasonably modern ERP systems.
We already have a planning system. How does ICS add value?
Most inventory planning systems are variations of the traditional “error-based” methodologies. Because of their relative lack of granular risk modelling these systems can benefit from the addition of the risk modelling inputs for their own data processing purposes.
It is not unusual to see the ICS system interfaced with another existing inventory planning system where ICS hands risk-conditioned safety stock settings to the existing planning system for further processing.
The result has always been improved inventory level accuracy and improved inventory performance.
Will we need more staff to use the system?
No. Because of the advanced data processing and the inventory visibility provided, much less time needs to be spent on data manipulation and more time can be spent on intelligence interrogation and review.
Inventory “operators” are converted into far more valuable inventory analysts.
It is usual to see much better use made of existing staff rather than to see an increase in staff.
How long does it take to install the system?
The full ICS system installation project is somewhat dependent upon the customer’s business complexity but normally the “Go-Live” date is about 3 to 4 months after the system implementation begins.
The track record of the ICS system implementation team is very good. These projects almost always come in on time and since we fix bid our project they are always within budget.
How much training is needed for new system users?
Early in the implementation project about a week of formal training in the logic that underpins the ICS risk-based methodology is given to future system users and to the relevant members of management.
About 3 weeks later, and once the system has been installed with current customer data, another week of system usage training is conducted. This training is usually hands-on training with the trainees logged in to the ICS system where they can simulate the execution of recommended purchase orders, stock transfers, demand forecast adjustments, etc. They can now also review and analyze their products by accessing the system’s inventory performance KPI’s and a variety of inventory reports.
Once the system has gone live another week of post go-live support is recommended. This time, however, the training is in the live operating environment and takes place under actual operating conditions.
After these on-site training activities further training and coaching assistance is offered on-line and by telephone. (Customers have access to a 24/7 help desk at FDC Solutions.)
What language is the system written in?
The ICS desktop client is a high performance Windows Presentation Foundation (WPF) application communicating with Windows Communication Foundation (WCF) back end services. Both are .NET Framework 4 and written in C#.
The ICS server is a scalable, distributed processing application written in Java and runs in the Standard Edition Java Virtual Machine version 1.7 or later.
The database system supported is Microsoft SQL Server 2008 or later, with Microsoft Analysis Services also utilized. In the ICS system the Client is developed in .Net (C#) and the Server is developed in Java.
Can we manage our business units individually?
Yes, it is commonplace to see customers managing the inventories of different business units individually, often with different staff and at different company locations. Sometimes the different business units have even operated on different ERP systems.
How scalable is the system?
The ICS system is very scalable and additional processing capacity is readily added by installing additional application servers.
One of the larger ICS customers in the automotive parts business, and possessing a network of 450 stores in Australia and New Zealand, processes about 125,000 product purchase orders and stock transfer orders in ICS per week. (Each store stocks about 35,000 line-items). The workload is handled by a staff of 5 system users.
In what industries has ICS been deployed?
The ICS methodology and system has successfully been implemented in a variety of different industries. Some have been in the distribution and retail sectors and some have been in manufacturing.
Examples of recent distribution and retail customers include NAPA (Australia and New Zealand), John Danks (Lowes owned in Australia), Komatsu Australia, Casama Wine Distributors (Australia), CoolDrive Auto Parts (Australia), Caterpillar China, and Caterpillar Dealers in Jakarta, Indonesia as well as in Phoenix, Arizona and in Salt Lake City, Utah.
Manufacturing companies have included BHP Steel (Australia), Diageo (Australia), BTM Tube Mills (Australia), Stream Solutions Australia (Print Management) and Lumen Australia/Thailand (OEM Auto Electrical Components).
In general, most industries where immediate fulfilment of non-fashion products is needed, and where the products stocked are durable or shelf-stable, are suitable for the ICS methodology and system.