Elkjøp has the No. 1 position in the electronics industry in the Nordic region, and they have the ambition to maintain it. If so, they must be at the height of purchasing as well. — Nils Vanebo
PUBLISHED Wednesday, November 02, 2022 – 1:14 PM
Before the summer holidays, Elkjøp decided to implement Blue Ridge’s Supply Chain Planning (SCP) platform for demand forecasting.
Effects that Elkjøp hopes to achieve
- Work smarter, with higher precision.
- Better insight and control.
- Higher quality of stock and better profitability throughout the value chain.
- Lower inventory volumes on goods that sell little and higher service levels on goods that sell a lot.
- Optimizing effects on the central warehouse.
- Free up time on the operational that can be spent on the strategic.
“We needed both a system for purchasing planning and replenishment of expertise,” Julius Getz Mørk, responsible at Elkjøp for replenishment planning, tells Retailmagasinet.
Elkjøp has carried out a reorganization of the purchasing function, which was previously spread out across each of the six main product categories.
“We have specialized more and gathered purchasing and store replenishment functions in one department consisting of 30 employees,” says Mørk.
The employees in the merged department are divided into three teams: two on purchases for central warehouses and one on store replenishment.
Elkjøp’s planning research community is among the largest in Norwegian retail. The size of the chain also indicates this: As many as 14,000 articles are followed up manually every day,
One benefit Elkjøp has wanted to achieve is to effectively share internal best practices.
“We have already succeeded in this, and we are now working more efficiently,” says Mørk.
Increased complexity in the pandemic
Even for Elkjøp, it is not easy to predict demand. Home electronics is a complex industry, and a number of outside factors that are difficult to forecast come into play: trends, customer sentiment, design and tests. In addition, there are factors among suppliers and in the transport sector: taxes and price increases, disturbances in the supply of labor in the value chain.
The complexity of the supply chain did not diminish when the pandemic hit in 2020.
“We found that it became more difficult to confirm orders. There was also greater uncertainty about delivery times,” says Mørk.
Like most retailers, Elkjøp incurred higher inventory levels through the pandemic. Sales increased, but an uneven supply chain made it difficult to plan.
“Would Elkjøp have handled the extra challenges in the purchasing function better if you had had the SCP solution in place already then?”
– If not necessarily better, then simpler. We probably would have handled the lead time variations better. The most important thing is to have competent people who can handle unforeseen events, such as Covid-19, Mørk answers.
Abandoning proprietary solution
Adopting SCP tools is part of the process of making Elkjøp more data-driven.
“We didn’t start from scratch, but now we’re going up to a new level,” says Mørk.
Before the acquisition, they relied on Excel and proprietary software based on Python.
“But we lack algorithms. To a great extent, we followed old routines,” Mørk acknowledges.
Humans are unable to relate to many variables at once.
People and expertise
Julius Getz Mørk emphasizes that it is the combination of a good IT solution and the expertise of the employees that will lift Elkjøp on purchasing:
“Human flair and a good computer tool are optimal. The complex and strategic tasks are solved by humans, not robots or AI.
Uninteresting, repetitive and simple tasks are good candidates for automation. It gives buyers more time to concentrate on the tasks that require human insight and experience. The system also helps us to take into account all parameters that may affect the purchase proposal. The key is to build competence over time, provide buyers with good system support, and thus make better decisions on complex issues.
Sverre Rosmo is responsible for the Nordic region in Blue Ridge. Nils Vanebo
Elkjøp considered a number of system suppliers before making a decision. The choice ultimately fell on Blue Ridge.
“None of the solutions we considered were best on all criteria. A prerequisite we set was that the supplier had representation in Norway. Blue Ridge was a good match. We were in tune in mindset,” says Mørk.
Sverre Rosmo, responsible for the Nordic region at Blue Ridge, was naturally pleased to have Elkjøp as a customer.
“Many retailers, wholesalers and distributors have a lot to gain from professionalizing through SCP support tools. There is potential in everyone, both big and small,” says Rosmo.
Many people who use tools discover that it has overstocks, often 40-50%.
In addition to the gain from a lower stock, it tends to be more balanced: You have the goods that are expected to sell.
Expecting quick effect
When Retailmagasinet visited in September, tests were still ongoing, which started in May. Full implementation occurred in October.
Sverre Rosmo confirms that half a year of tests before implementation is common:
“Elkjøp is a major customer and has a system with many dependencies.
Julius Getz Mørk expects clear results in the coming months.
“Elkjøp wants to see results right away. The system logs the winnings, promises Sverre Rosmo.
Benefits of Good Supply Chain Planning (SCP)
Forecasting demand is essential for any business that keeps inventory. If you order too much, it ties up both capital and storage space. Perhaps items need to be sold at a big discount to get them out. If, on the other hand, you order too little, the retailer runs the risk of the customer getting frustrated and going to their competitor instead.
If a supplier is going to raise their prices, an SCP solution tells you how much you can save by buying more, in what quantities and frequency.
Trading companies have a perpetual stream of information from suppliers about new products and about prices going up and down. Many do not relate to this. It will be easier to take advantage of opportunities that arise if you have an SCP tool. The system helps calculate campaigns and looks at profitability and turnover in inventory.
An SCP solution can analyze and forecast tens of thousands of article numbers and present the most profitable scenario for each item.
With an SCP tool, purchasing decisions are based on detailed, data-driven insights rather than assumptions. The prediction combines data science (AI and machine learning) with human input.