Man-Dirk (Pty) Ltd is a well-established manufacturer and distributor of tools and mining support products. Operating from head offices in Gauteng, the company services the mining industry throughout SA and neighbouring SADC countries.
With an annual turnover of about R120 million and some 300 clients - including Anglogold, Amplats, Harmony and Iscor - the amount spent on inventory is a central issue for a business which holds inventory of over R7 million and purchases about R3 million monthly in the tool division alone.
In this line of business, Man-Dirk has to provide customers with reliable continuity of product which must also be achieved on a time-critical basis, as the costs of downtime in the mining industry are unacceptably high.
A properly functioning inventory system is essential for Man-Dirk to meet its customers` needs while still keeping track of key financial aspects such as cost of inventory and predicting the budget requirements for future stock purchasing.
Peter Bernstein, Man-Dirk`s financial director, underlines the end results of implementing Execulink`s methodology and the Optimiza system. "I would say that the specific service offered is the best I have seen. The real benefit is that for the first time we have a tool with which to buy inventory on a scientific basis. Previously many of our buying decisions were based on the knowledge, experience and intuition of our buyers. Our buying decisions are now likely to be more accurate and based on future requirements rather than on historical data."
Obviously, this has immediate benefits for the company`s bottom line. A projected saving of some R2 million in inventory is the initial advantage. However, the other advantages of the Execulink methodology are equally apparent and - although less easy to quantify - have a more pervasive effect on the healthy operation of the business.
The first step was to identify and clean up invalid data on Man-Dirk`s database, but the next step was more important - putting in place the procedures and disciplines to ensure that new data entries were validated. .
Man-Dirk joined Execulink as an Optim client. This service offering gives the immediate benefit of having a dedicated, experienced consultant on site, who implements the methodology, installs the software and trains staff. Carlos Serena spent a lengthy amount of time working with Man-Dirk`s staff to properly understand the nature of the business, customers` needs, products and systems. This is just part of what Derek Roux, Chairman of Execulink, calls a "roll up the sleeves" approach.
"However effective a software solution is, inventory issues can finally only be addressed by involving the people who run the system," he says.
Apart from establishing controls which deliver according to the client`s business model, some of the people aspects involved a more subtle shift of mind set. "We had to convince our buyer and sales staff that the system could generate real benefits without being merely additional work for them," says Bernstein. "We also had to overcome some resistance at senior management level resulting from the belief that we could achieve a similar result using our existing systems."
Serena points out that the system deployment was complex, allowing for all the advantages which Optimiza contributed to his client`s inventory control. "Various scenarios were presented to determine which was the model of optimum performance for Man-Dirk. Then it was necessary to identify the 20% of stock items that generate 80% of the business revenue.
"We could then pay attention to demand and lead-time management, ensuring that future ordering is correctly predicted and suppliers` lead times were accounted for. The ordering process was also optimised, again helping to reduce unnecessary investment in inventory."
Roux highlights the delicate balance needed throughout the process. "It is not just a matter of simply reducing inventory. The real driver of competitive advantage must always be service and inventory availability and, typically, this needs to be improved while reducing inventory levels.
"A key element of our Execulink methodology is its capacity for exception-based reporting, highlighting issues which could have negative impact before they happen. This has assisted Man-Dirk to become proactive as opposed to reactive, regarding its management control of inventory functions."
Bernstein sums up this achievement. "Execulink helped us to become more professional in our buying and stock holding decisions. This allows us to offer better levels of service to our customers while at the same time reducing our investment in inventory. In addition, our knowledge and skills have improved due to working with Execulink and benefiting from their expertise."
The latest figures indicate a 17% reduction in stock holding with a simultaneous 6% increase in availability. To this achievement can be added the complete streamlining of the client`s database with complete data validity, enabling correct business decisions based on the right information.
"With an expected annual increase in turnover of about 15%, we look forward to an ongoing relationship with Execulink," concludes Berstein.
Execulink - giving you the tools to improve your ROI through maximising and optimising your end-to-end logistical processes within the supply chain.
Our typical results show:
. Reduction of inventory holding levels by as much as 50%.
. Increase of customer service levels and availability by 15%.
Our approach and methodology is systematic and results-oriented. We believe that people are critical for the success of any project, and support them with sophisticated decision support software, training and feedback mechanisms.
Our unique methodology makes use of 80/20 principles, allowing the user to focus attention on whatever will generate the largest improvement with the least effort in the shortest time frame.
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