Stanley Black and Decker Merges Best of Both Worlds
A new powerhouse in the home improvement market was created in March 2010 when The Stanley Works merged with The Black & Decker Corporation to become Stanley Black & Decker. The combined company started out strong, reporting revenues of $8.4 billion in 2010, up 125 percent versus the prior year.
Yet, its continued success is dependent upon ongoing integration, including transferring the best practices of each company across the combined organization. In supply chain, Michael Martin, manager of global supply chain strategy for Stanley Black & Decker, is focused on the integration of a key process area: Inventory Optimization.
“Many companies would interpret inventory optimization to mean using statistical formulas to calculate safety stock or a physical distribution network strategy. But inventory optimization at Stanley Black & Decker means more than that,” says Martin.
He explains inventory optimization means tying together the entire physical value chain of a product — from raw materials to finished goods at the point of sale and everything in between — using real demand variation and process capabilities so that it can hold the least amount of total inventory while servicing customers with fill rates above 98 percent.
An improvement initiative in this critical area started at Black & Decker in 2004 when multi-echelon inventory optimization was identified as the fastest and most effective approach to solving some of its biggest supply chain issues, like unsatisfactory fill rates and excess inventory.
Black & Decker implemented Logility Voyager Inventory Optimization as a stand-alone package, pulling raw input data from existing reports and planning systems. The initial use of the software started with a pilot on one assembly line and has grown from there to become a true multi-echelon inventory optimization system.
“What we learned from the evolution is that adopting a policy and setting targets at multiple stages delivers the biggest inventory savings and fill rate lift. Adding in true multi-echelon inventory optimization supports a small incremental inventory reduction but delivers better ability to execute the production schedule in the current state,” explains Martin. “We were close to having the entire global Black & Decker tools business implemented when the merger began.”
As a stand alone company, Black & Decker saw several meaningful changes to business processes since adopting Logility software. For one, the organization removed debate and finger pointing about fill rates. With a good policy and good targets, once the inventory is in place, Black & Decker takes less fill rate hits. Fewer issues mean less investigating, reporting and explaining. When orders are missed, a post mortem analysis often shows that the order volume significantly exceeded the levels experienced in the past 52 weeks.
No more blame games aside, the most important change stems from Black & Decker’s newfound ability to look at its business in ways which were not possible before.
“We now know how much inventory we had and how much we should have really needed, and with that insight we began a continuous process of peeling the onion to eliminate waste,” says Martin. “Why do we have so much? Well, now we can answer that!”
For example, one area modeled showed that Black & Decker was consistently operating around 175 percent to target inventory in finished goods on hand at distribution — almost twice as much inventory needed to cover normal demand in its current business model. With the data in hand, they then figured out how to measure the inventory error by cause and discovered that 75 percent was clearly unnecessary inventory. A whopping 32 percent was the result of a combination of line balancing (for manufacturing efficiency), pre-building (to avoid capacity or supplier constraints) and the over-planning effects common with most MRP and advanced planning systems.
“Granted, fixing any one of these causes of error won’t happen overnight, but now we have the data and a call to action to address each one on its own — and standing on their own, each one of these problems is easier to scope, assign resources and attack,” says Martin.
In addition to optimized visibility, Black & Decker reports tangible benefits in each phase of the inventory optimization evolution. For example, it reduced the targeted finished goods days of stock from one of its largest manufacturing plants by 25 percent. It also reduced the amount of raw materials and components — suffering no adverse impact to service levels.
“These types of results were repeated as we moved through our business and learned more about our supply chain,” says Martin. “Of course, it all depends on your starting point. If your fill rates are bad you may need to invest in inventory, make other fundamental changes and then look for inventory savings.”
The inventory optimization practices that work for the Black & Decker business are now being piloted with the Stanley business’ largest sources and markets first. Stanley already has a solid target setting process for single stage targets, so inventory optimization software is expected to replace that and evolve toward multi-echelon.
FAST FACTS
Company at a Glance
Formed by way of a merger in March 2010, Stanley Black & Decker is now a diversified global provider of hand tools, power tools and related accessories. Its portfolio includes the Baldwin, Pfister, Bostitch, DeWalt and Kwikset brand names, among many others.
Words of Wisdom
"We still have plenty of room for improvement, but positive results prove that we are doing the right things — and getting wiser about how we respond to dynamic market conditions." — Michael Martin, Manager of Global Supply Chain Strategy, Stanley Black & Decker
Pick and Choose
Inventory optimization best practices from the Black & Decker legacy business are being adopted company-wide to continue success across the entire value chain.
Securing Business
Stanley Black & Decker, through its use of multi-echelon inventory optimization, was able to reduce inventory on hand and simultaneously improve fill rates.
Yet, its continued success is dependent upon ongoing integration, including transferring the best practices of each company across the combined organization. In supply chain, Michael Martin, manager of global supply chain strategy for Stanley Black & Decker, is focused on the integration of a key process area: Inventory Optimization.
“Many companies would interpret inventory optimization to mean using statistical formulas to calculate safety stock or a physical distribution network strategy. But inventory optimization at Stanley Black & Decker means more than that,” says Martin.
He explains inventory optimization means tying together the entire physical value chain of a product — from raw materials to finished goods at the point of sale and everything in between — using real demand variation and process capabilities so that it can hold the least amount of total inventory while servicing customers with fill rates above 98 percent.
An improvement initiative in this critical area started at Black & Decker in 2004 when multi-echelon inventory optimization was identified as the fastest and most effective approach to solving some of its biggest supply chain issues, like unsatisfactory fill rates and excess inventory.
Black & Decker implemented Logility Voyager Inventory Optimization as a stand-alone package, pulling raw input data from existing reports and planning systems. The initial use of the software started with a pilot on one assembly line and has grown from there to become a true multi-echelon inventory optimization system.
“What we learned from the evolution is that adopting a policy and setting targets at multiple stages delivers the biggest inventory savings and fill rate lift. Adding in true multi-echelon inventory optimization supports a small incremental inventory reduction but delivers better ability to execute the production schedule in the current state,” explains Martin. “We were close to having the entire global Black & Decker tools business implemented when the merger began.”
As a stand alone company, Black & Decker saw several meaningful changes to business processes since adopting Logility software. For one, the organization removed debate and finger pointing about fill rates. With a good policy and good targets, once the inventory is in place, Black & Decker takes less fill rate hits. Fewer issues mean less investigating, reporting and explaining. When orders are missed, a post mortem analysis often shows that the order volume significantly exceeded the levels experienced in the past 52 weeks.
No more blame games aside, the most important change stems from Black & Decker’s newfound ability to look at its business in ways which were not possible before.
“We now know how much inventory we had and how much we should have really needed, and with that insight we began a continuous process of peeling the onion to eliminate waste,” says Martin. “Why do we have so much? Well, now we can answer that!”
For example, one area modeled showed that Black & Decker was consistently operating around 175 percent to target inventory in finished goods on hand at distribution — almost twice as much inventory needed to cover normal demand in its current business model. With the data in hand, they then figured out how to measure the inventory error by cause and discovered that 75 percent was clearly unnecessary inventory. A whopping 32 percent was the result of a combination of line balancing (for manufacturing efficiency), pre-building (to avoid capacity or supplier constraints) and the over-planning effects common with most MRP and advanced planning systems.
“Granted, fixing any one of these causes of error won’t happen overnight, but now we have the data and a call to action to address each one on its own — and standing on their own, each one of these problems is easier to scope, assign resources and attack,” says Martin.
In addition to optimized visibility, Black & Decker reports tangible benefits in each phase of the inventory optimization evolution. For example, it reduced the targeted finished goods days of stock from one of its largest manufacturing plants by 25 percent. It also reduced the amount of raw materials and components — suffering no adverse impact to service levels.
“These types of results were repeated as we moved through our business and learned more about our supply chain,” says Martin. “Of course, it all depends on your starting point. If your fill rates are bad you may need to invest in inventory, make other fundamental changes and then look for inventory savings.”
The inventory optimization practices that work for the Black & Decker business are now being piloted with the Stanley business’ largest sources and markets first. Stanley already has a solid target setting process for single stage targets, so inventory optimization software is expected to replace that and evolve toward multi-echelon.
FAST FACTS
Company at a Glance
Formed by way of a merger in March 2010, Stanley Black & Decker is now a diversified global provider of hand tools, power tools and related accessories. Its portfolio includes the Baldwin, Pfister, Bostitch, DeWalt and Kwikset brand names, among many others.
Words of Wisdom
"We still have plenty of room for improvement, but positive results prove that we are doing the right things — and getting wiser about how we respond to dynamic market conditions." — Michael Martin, Manager of Global Supply Chain Strategy, Stanley Black & Decker
Pick and Choose
Inventory optimization best practices from the Black & Decker legacy business are being adopted company-wide to continue success across the entire value chain.
Securing Business
Stanley Black & Decker, through its use of multi-echelon inventory optimization, was able to reduce inventory on hand and simultaneously improve fill rates.