Improved inventory optimization leads to beautiful results

Health and beauty retailer Matas automates forecasting and replenishment with SAS®

Intelligent logistics is part of the success at Matas. Today, all its stores use automated replenishment based on forecasting, which frees resources for customer service.

“While it is not easy to introduce innovative new technology into an entire chain, there is no doubt that automated replenishment has been a success,” says Jesper Amsinck, Logistics Manager at Matas.

Matas is Denmark’s largest health and beauty retailer. The company uses SAS Inventory Optimization Workbench to automate its product replenishment and forecasting operations. Amsinck says intelligent logistics is one of the major transformations Matas has undertaken on its journey from owner management to listed company.

“The system passed an important test when we introduced perfume products to the new distribution center,” Amsinck says. “Previously, these items were delivered directly from the suppliers to the stores. The system handled the change without much trouble and with minimum coding. It even went quite smoothly when we doubled the number of items all at once.”
 

More time for customer service

The SAS solution handles planning and locked-order proposals from the stores to the distribution center. Previously, staff at each store spent 90 minutes a day reviewing proposals – time now freed up for better customer service.

“Automating the replenishment process saves stores approximately nine hours a week. In addition, we have significantly fewer stock-outs,” says Johnny Rolsted, Logistics Team Manager at Matas.

To test the viability of the solution, Matas conducted a blind test with 10 stores on an automatic replenishment process and 10 stores with a manual process. The results were clear. The test demonstrated that when a store converts to full automation, it saves time and has fewer stock-outs, with the potential to reduce capital tied up in stock by 40 percent.

“When we showed these results to management, it blew them away,” says Rolsted.

With SAS in place, the retailer can manage the allocation of items for the distribution center, order proposals for direct suppliers, and supply long-term forecasts for procurement and suppliers. Additionally, Matas saves millions of dollars a year, despite the project not being designed for cost savings.

World-class procurement

Matas also uses SAS to support its procurement function. The retailer generates six-month forecasts and provides purchasing proposals to suppliers. Now only one person is required to manage the procurement of thousands of item numbers for the entire chain.

The solution considers several conditions when providing a purchasing proposal: sales trends, the season, store opening hours, delivery time and others. Data is extracted from the operational systems and is used to generate statistical forecasts on future sales. These forecasts, data on inventory and financial figures are all used to generate the orders.

The system is also equipped with rules for optimal inventory policy in relation to the first opening of the item, and order size will be calculated so that the cheapest option is selected compared to next whole packages. In this way, it contains quite sophisticated human considerations. However, it is only able to fulfill its task if the store staff provides it with data on the actual inventory in the store.

“Our experience shows that nine out of 10 forecasting errors are due to incorrect inventory and erroneous master data – not due to the forecasting,” Rolsted says. “For this reason, the store's accuracy of inventory count is crucial to our total efficiency.”

The fully automated forecast is an indisputable success. When we compare ourselves internationally and in Denmark, we see that we’re keeping up with technological developments,” Amsinck says. “We’re level with the big retail chains, and we’re ahead of most specialized chains.”