Another example where The Virtual Forge was able to innovate for a client in the supply chain space involved a large distributor of automotive parts. Their business had a segment where they would purchase existing parts sellers that operated as an integrated part of a larger business. Think for example a parts counter that services a bus fleet or a parts depo for a municipality.
They would buy these integrated parts businesses, including buying the existing inventory of parts that they had on hand. They would then take over the operations of those parts counters to essentially sell those parts back to the business over time, as they were needed, and make their profit in that way.
The Virtual Forge addressed a significant issue for the client, excess inventory and dead inventory, common in standalone sites operating under their business model, resulting in no means to monetize that inventory.
The Virtual Forge worked with this client to understand their operational and technical challenges, and to design a business process and software application to help improve it. Their main challenge was that these purchased parts businesses operated like individual businesses, which were subject to the risks of supply and demand within their individual markets.
However, what they had but could not yet leverage was a network of many locations, each with their own supply and demand profiles and a lot of overlap in the parts that they carried. This would be a powerful sales network if the data could be unlocked.
The Virtual Forge conceptualized a centralized inventory exchange by aggregating individual inventories into a regularly refreshed central source, employing data mapping to ensure seamless part interchangeability. Through meticulous analysis, we pinpointed excess inventory, calculated based on current stock levels and probable sales cost, focusing on high-value excess items.
Leveraging this insight, they identified sites with high consumption for these parts, devising an algorithm to facilitate matchmaking between sites that tended to need a certain part, and those that had many in stock. This was based on factors like distance and transportation costs, in a user-friendly interface for streamlined inventory management. This interface facilitated optimal matches between sites with excess inventory and those in need, enabling efficient inventory push and pull strategies, alongside managing site-to-site transfers seamlessly.
The net impact to the business was millions of dollars of savings as their excess parts inventories were able to be purchased and used rather than disposed of or sold externally for pennies on the dollar.
Additionally, the carrying inventory efficiency of all of the sites in the network was improved as they gained both an outlet for excess inventory, and a cost-effective means of sourcing critical parts inventories.
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