ToolsGroup First to Market with Modeling Non-standard Obsolescence
Venture-backed car dealership Tricolor Auto Group saves 20% in inventory costs
BOSTON, June 29, 2015 /PRNewswire/ -- ToolsGroup announced today that it is the first supply chain planning software vendor to offer a set of special algorithms specifically for modeling non-standard obsolescence. These help companies minimize the costs associated with obsolete inventory write-offs. They are available now in the latest version of ToolsGroup's SO99+ 'Powerfully Simple' supply chain planning software, version 7.5.0.
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Applying uniform logic to obsolescence doesn't always work because items don't always lose value at a constant rate. The value of perishable items such as pharmaceuticals or fresh foods can deteriorate more quickly as they approach their 'use by' date. A 'long-tail' item like a specialized electronic component may not physically deteriorate, but its value will be adversely impacted by a newer version planned for release.
With SO99+, customers can adapt obsolescence algorithms to create curves that identify the point where a SKUs value deteriorates or costs increase, so it can no longer be sold at a profit, provoking action before losses accumulate.
Tricolor Auto Group offers a good example of a company with a unique obsolescence model and the need to minimize these costs. They saved 20 percent in inventory and obsolescence costs in only three months.
Automobiles depreciate in value over time, and a combination of debt and equity financing means that Tricolor's interest rates and costs grow the longer cars are held in inventory. ToolsGroup's obsolescence models allow Tricolor to correctly model these uniquely accelerating curves. In addition, each car is reconditioned according to the needs of that make and model, but the interest rate on the reconditioning cost does not accelerate at the same rate as the original cost of the car. Therefore another formula calculates the interest on reconditioning cost for each vehicle.
Variables like these make it difficult for Tricolor to establish the optimum inventory levels that enable each car to be resold for its maximum value, while still holding enough inventory of the right cars to satisfy customer demand. ToolsGroup's obsolescence algorithms helped Tricolor optimize inventory for its unique scenario.
According to Rebecca Roberts, Vice President of Operations, Tricolor Auto Group, "We are really encouraged by the 20 percent inventory savings we've made already and we fully expect to gain further benefits over time. No other vendor offered anything specific to help us optimize against our unique set of constraints."
Joseph Shamir, CEO, ToolsGroup commented, "Multi-channel complexity, long-tail SKUs and shorter innovation cycles exacerbate write-offs of billions in inventory every year. Being able to model these cost properly is an important step in mitigating this problem."
About Tricolor Auto Group
Tricolor Auto Group operates a network of 16 dealership rooftops focused on the needs of the Hispanic market. Working across Texas and Oklahoma, Tricolor's mission is to provide the Hispanic market with better financial terms, a better-quality experience and, ultimately, a better vehicle than other dealerships. To learn more, visit: www.tricolorauto.com.
About ToolsGroup
ToolsGroup is a global provider of "Powerfully Simple" supply chain planning and demand analytics software. Our customers overcome volatile demand and challenging supply chains to generate accurate forecasts and outstanding customer service levels with less global inventory. Reliable behind-the-screen technology and scalable statistical models enable highly intelligent data-driven decision making, combined with ease of use. ToolsGroup's solutions span key supply chain planning areas such as Demand Forecasting and Collaboration, S&OP, Demand Sensing, Promotion Forecasting and Multi-Echelon Inventory Optimization (MEIO). For more information visit www.toolsgroup.com or follow us on Twitter @ToolsGroup.
SOURCE ToolsGroup
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