Case

Normet

Customer-driven demand planning to improve service and inventory levels for spare parts

About Normet

Normet is a fast-growing multinational company offering solutions for underground mining and tunneling. Their mission is to lead the transformation into a more digital and sustainable tomorrow. They help their mining and tunneling partners continuously improve their processes, increase the safety and productivity of their underground activities, and improve the sustainability of their operations.

  • Industry: Underground construction
  • Founded: 1962
  • Company size: 341 MEUR
  • Markets served: Globally with over 50 locations in 28 countries worldwide

Challenge: No end-to-end demand planning process

Sales and Operations Planning (S&OP) is a cross-functional process that helps bring different views together for a balanced decision-making process. Typical benefits include improved service levels by decreasing stockouts and increased flexibility to respond to unexpected events.

One of the key initiatives at Normet was to implement a customer-driven demand planning process to optimize the end-to-end delivery chain. Normet has set up its organization to be as close to the customer as possible. That has created a challenge in utilizing regional long-term plans globally and getting visibility to what was actually sold to customers.

In addition, the local planning windows tended to be quite operative, contributing to reactive behavior, and item segmentation was not done to identify where to allocate most manual focus.

“With the new demand planning process increasing our cross-functional collaboration, we are able to increase the accuracy of our demand plan.“

Lasse Mod, Director of Spare parts business, Normet Group

What was done

There was a lot of variability in the local demand planning functions and ways of working. Thus the project aimed to define a global model of how to do demand planning locally. The main improvements were set around three themes:

  1. Increased visibility and collaboration between local and global supply chain teams
  2. Moving from reactive to proactive by increasing the planning window
  3. Segmentation of items to identify where the manual focus should be targeted to minimize risks

With actions around these areas to improve forecast accuracy, the potential savings were calculated to be -30% from inventories of the first pilot region.

Improved focus, less fire fighting, and increased visibility

First of all, the items were segmented to bring focus to planning. This was done based on item value and the stability of the demand, i.e., predictability for the item. These parameter segment items were based on how risky the stocking decisions are, i.e., where the manual focus should be targeted.

For the low-risk products, the statistics are more trustworthy, and we can trust the systems to handle purchases based on set parameters. This way of working releases time and effort, which can be targeted to the items that make a difference in inventory value and risks.

Secondly, the new demand planning model wanted to increase cross-functional collaboration. With sales involvement, customer insights and fleet knowledge can be incorporated into the rolling plans to increase the maturity of the demand plan.

Finally, to increase the visibility of local operations, reports were developed to Power BI, including, for example, the following KPIs:

  • Inventory development
  • Forecast accuracy
  • Aging analysis
  • Availability analysis.

In addition to the reports, some new tools were also developed to PowerBI to release time from creating ad-hoc excel analyses, for example:

  • Segmentation tool
  • Simple statistical forecast calculations
  • Consolidated forecast analysis tool

The most significant chunk from the workload consisted of the implementation of the new ways of working and tools. Buy-in from the local teams was a key success factor. Training around the benefits of the demand planning process was held, and the teams of the pilot regions were involved in the design process from early on. After the initial training and the pilot demand planning round, follow-up was continued to ensure sustainable results.

“With the new demand planning process increasing our cross-functional collaboration, we are able to increase the accuracy of our demand plan. Segmented spare part groups and the new process are necessities in enabling a new proactive way of working. The same model will be applied to all Normet regions to become a standard way of working. This is a good stepping stone for further development.”

Lasse Mod, Director of Spare parts business, Normet Group

Results

The demand planning process for the pilot regions is moving from reactive to proactive. The focus is to do the right things; there is clarity in ways of working and increased visibility to follow up on the wanted results.

The demand planning process typically has multiple benefits along the whole supply chain. Here are a few examples of the results that were achieved by increasing visibility, widening the planning window, and improving focus:

  • One of the key enablers in 33% of inventory value decrease in the first pilot region over the first six months after implementation
  • The inventory “health” of the second pilot region improved – the share of high-movers grew from 39% to 51%
  • Sea freight utilization enabled for both pilot regions – 7% savings in total freight costs over the first six months after implementation
  • Effective ramp up and ramp downs during the covid-19 lockdown in the first pilot region
“From reactive to proactive – Let’s start!”

Paul Subham, Local planner reflecting on the initial training session

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