For years, the gold standard for many heavy equipment dealers has been "Min/Max" stocking levels. However, as one of the largest heavy equipment dealers in the western USA discovered, static levels often fail to account for the actual risks inherent in supply and demand.
The Challenge of Misaligned Capital
The company previously managed procurement with min/max levels that were not directly linked to inventory risk. This created a "drag" on financial performance: capital was over-invested in some Stock Keeping Units (SKUs), while others were insufficient, leading to costly work stoppages due to parts shortages.
The ICS Solution: Granular Risk Measurement
The company implemented the Inventory Capital Solutions (ICS) advanced planning system by FDC, which replaced static calculations with dynamic risk modeling. Key elements of the implementation included:
Line-Item Granularity. Risk measurement and modeling are performed at the line-item-by-stocking-location level and tracked daily.
Intelligent Forecasting. The system uses advanced algorithms to calculate precise lead times and detect seasonal demand patterns, ensuring orders are accurate rather than reactive.
Automated Re-Balancing. By minimizing manual over- and under-compensation for risk, the system automatically rebalances inventory portfolios with risk-appropriate stocking parameters.
The Results
The impact was immediate. Within just four months of go-live, the company saw a 24% to 34% reduction in stock levels while maintaining or improving target availability. A few months after that, the company attained the #1 dealer ranking for its primary manufacturer’s parts KPI metrics across all of North America.
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