Lennox Residential Heating and Cooling faced the challenge of managing an ambitious North American distribution network enlargement while simultaneously transitioning to a hub-and-spoke model with 55 shipping and 161 selling locations.
Rebecca Roberts, Director of Supply Chain Planning, realized that the business scenario called for a flexible, self-adjusting system with comprehensive statistical forecasting that could set stocking targets at an SKU-Location level based on demand variability, service levels, costs and other parameters.
Their goal was straightforward enough: improve service levels and optimise inventories to reallocate working capital and balance inventory allocation in the changing network. But the supply chain environment was daunting. It included:
Lennox implemented ToolsGroup’s SO99+ solution to dynamically rationalise the inventory mix and create an operational plan that sets inventory stocking targets and balances service levels with inventory cost. The system allows Lennox to reliably model both seasonality and variable demand patterns. Network inventories are rebalanced by creating a dynamic optimal mix of inventory and service levels down to the store level. Lennox can also set global service policies by group or category and then the system automatically calculates individualised service levels for each SKU-Location.
The solution is integrated to Lennox’s SAP APO platform. Deloitte Consulting provided integration services and addressed key strategy, technology, and change management issues. Key capabilities include:
The process includes:
Lennox also uses machine learning to reliably model highly variable seasonal demand patterns. It sifts through hundreds of thousands of SKU-Locations to identify “clusters” of those with similar seasonality profiles. These enhanced seasonality clusters substantially increase peak period forecast accuracy.
Improved service levels by 16% while simultaneously increasing inventory turns by 25%. Supported significant increases in sales and market share growth.