When plumbing and pipes / valves / fittings (PVF) distributors think about issues related to compliance, they often think about things like employee training, physical audits, updating MSDS information and communicating appropriate changes to customers. What may not come immediately to mind is that compliance issues can have a significant impact on your inventory as well.
Several years ago the PVF industry faced changing regulations associated with lead-free laws in states like California and Vermont. The laws changed and the industry was no longer allowed to use leaded pipes for potable water. While many plumbing and PVG distributors saw this as an opportunity to sell new products, they also faced the issue of having a lot of existing leaded inventory in their warehouses. Because this leaded inventory could only be sold for non-potable uses, it created some unique inventory management challenges.
Plumbing and PVF distributors suddenly had to understand the differences in both sales and replenishment levels for two kinds of pipes – leaded and lead free – where they may not have tracked demand by those two categories before the change in law. It was now very helpful for a distributor to be able to predict how much of their sales were used in potable and nonpotable applications even though they may have never tracked that information inside of their ERP system. It caused quite a bit of confusion with many buyers in the plumbing and PVF industry. How much are we going to sell of the lead-free products versus the standard (leaded) inventory that we normally sell? How much sales of the standard products would now go to lead free products? How much do we buy and stock of standard and lead-free product?
Fortunately for Thrive users, Thrive could take and apply estimates that could then be used for more accurate forecasts for both standard (leaded) and lead free pipes. For example, a distribution company using Thrive could make an estimate of the demand for potable uses. Perhaps they estimated that 50% of their demand for standard items was previously used in potable applications. They could enter that estimate into Thrive, Thrive would then move 50% of the demand for leaded items over to lead-free items. In this way, Thrive helped them to start buying appropriately for the new lead-free items while at the same time reduce buying around their leaded items.
John Grasso, VP of Operations at Matco-Norca (a Thrive client) explains. "We wanted to get in front of this demand so we could take a leadership role in the market for lead-free products. Thrive helped us tremendously by moving estimated demand from standard to lead-free which automatically adjusted our stocking and purchasing of both standard and lead-free items. We used this technique for our initial load in."
Of course, over time Thrive continues to measure and adjust according to actual demand patterns. So if for certain items, lead-free sales were actually 25% of the standard item sales, Thrive would automatically adjust down the forecasts, stocking levels, and suggest PO's accordingly. "On certain items, some of the demand we thought we'd see in lead-free was less than expected; sales of the standard item never budged. All along the way, we were able to see in Thrive the forecasts based off of actual demand versus what we'd expected. At some point, there was enough actual sales of both that we removed our adjustments and used the Thrive natural forecast, which worked great to make sure we didn't have too much of the wrong products while maximizing our sales opportunities."