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The term “fashion-driven” could have been invented for the hair care industry. Products are updated and changed frequently, which makes it very difficult to build historical trends. Without history, forecasting is doubly hard, and without a proper system it’s impossible.

“Our previous system was manual, spreadsheet-based,” said Tony Poidevin, supply chain manager for KPSS in Australia. KPSS is a leader in the development, manufacture and distribution of hair care products for the professional market, with sales and manufacturing operations around the world. Its major brand is Goldwell. It first turned to Demand Solutions in May 2002.

“Around that time, KPSS began looking at implementing SAP in all its sites around the world. Part of the process was the recognition of the problems we had with forecasting in most countries.” KPSS headquarters in Germany supplies 30-40 jurisdictions, from a monthly-adjusted rolling plan, based on two- to three-month notice periods of required supplies. That lead time, plus the poor forecasting infrastructure, was leading to problems with global inventory levels. In the process of defining requirements for SAP, the company concluded that it would be more advantageous to seek a third-party solution for forecasting.

“Around that time, KPSS began looking at implementing SAP in all its sites around the world. Part of the process was the recognition of the problems we had with forecasting in most countries.” KPSS headquarters in Germany supplies 30-40 jurisdictions, from a monthly-adjusted rolling plan, based on two- to three-month notice periods of required supplies. That lead time, plus the poor forecasting infrastructure, was leading to problems with global inventory levels. In the process of defining requirements for SAP, the company concluded that it would be more advantageous to seek a third-party solution for forecasting.

“Our US subsidiary was already using Demand Solutions,” Poidevin said. “After they’d put it forward, I returned to Australia and asked the local Demand Solutions Australia to make a presentation.”

KPSS Australia had some specific problems in its market. Seventy percent of its products are supplied by overseas operations—most from Germany, but some from the US. It has a main warehouse in Sydney, and four additional warehouses around the country. Its customers wanted 24-48 hours delivery but the distances involved—ranging from nearly 4,000 miles to Perth to 750 miles to Adelaide and Brisbane—made that difficult.

“Our very manual, labor-intensive systems led to real problems getting stock into the warehouses to meet customer standards. We found ourselves moving inventory around from one warehouse to another to cover errors—and that left us with shortages,” he said.

Satisfied that Demand Solutions would be able to fulfill its requirements, KPSS Australia implemented Forecast Management and Requirements Planning three years ago. “Once it was up and running, it was very successful. We’ve really seen big improvements in fulfillment over the past 18 months. We’re supplying 99 percent of line orders and can fulfill 98 percent of back orders within our standards: 24 hours to the cities, 48 hours to country areas.” The company’s inventory position has shown a dramatic improvement.

“Sixty to 70 percent of our articles have established history, especially hair color,” he said. “Inventory for those items is down 30 to 40 percent. Even new product introductions are much better.”

Poidevin works with marketing to draw up a 12-month calendar that includes marketing promotions. The data is entered directly into Demand Solutions to ensure availability. “Our overall inventory, including new product launches, was reduced by about 25 percent between May 2002 and December 2005. Over the same period, we’ve grown sales by 20 percent.”

That’s just in Australia: Poidevin is also responsible for controlling supplies to New Zealand and Hong Kong. The company uses Demand Solutions Feedback for creating and updating forecasts with all 1,300 SKUs, which range from a few sales a month to 30,000.

About a third of its stock is manufactured by subcontractors in Australia. The remainder is shipped from overseas. Summaries using 12-month rolling forecasts firmed-up three to four months out keep the manufacturing contractors informed. Five- to six-week shipping times from Germany and the US mean inventory levels still have to be high to maintain a six-week supply, but improved forecasting and requirements planning has enabled KPSS to make better use of its working capital and provide better customer service—which has led to business growth.

“There was a big push to improve our forecasting and I had two months to achieve an improvement. We did it with no problem,” said Poidevin. “The Demand Solutions system has more than met our expectations. It’s simple to use and we’re more than happy with it.”

Click the link below to review the DS Magazine article.

DS Magazine Article – KPSS

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