Implementing AI Automation Across Inventory Management
Jul 22, 2024
Gradient Team
Overview
In the manufacturing industry, efficient inventory management is crucial for maintaining production continuity and customer satisfaction. A large HVAC manufacturer based in the US, with over 30,000 employees, faced significant challenges in managing its inventory. Partnering with Gradient, the manufacturer leveraged Gradient Agent Foundry to enhance demand forecasting, optimize supply chain operations, and present new inventory opportunities, leading to substantial improvements in overall business performance.
The Challenge
The HVAC manufacturer encountered several challenges in their inventory management operations, including:
Demand Forecasting: The company struggled with accurately forecasting demand due to highly seasonal fluctuations, market changes driven by the construction industry, and economic conditions. This led to frequent stockouts or overstock situations.
Supply Chain Disruptions: Global supply chain dependencies and component shortages, particularly of semiconductors with long lead times, disrupted consistent and timely inventory levels.
Inventory Costs: High storage costs due to the bulky nature of HVAC components and the need to maintain large inventories tied up significant capital, impacting cash flow and financial flexibility.
The AI-Driven Solution
To address these challenges, the HVAC manufacturer leveraged Gradient Agent Foundry to automate their inventory management process. Powered by Hummingbird, Gradient’s domain-specific model in manufacturing, the team produced three primary features to help with their ongoing challenges.
Inventory Insight
Gradient’s AI-powered solution provided comprehensive insights into the current inventory status and condition at each level (network, item, etc.) by leveraging the manufacturer’s existing SAP ERP. This solution enables supply chain teams to seamlessly integrate the operational demands of effective inventory management with the financial necessity of controlling inventory carrying costs, all while keeping global business objectives in focus.
Inventory Foresight
By harnessing current and historical data, Gradient enabled operators to simulate complex inventory decisions across the network. Operators could set global and local constraints to model realistic scenarios, considering both financial and operational constraints. This empowered them to make fully informed, near real-time decisions that drove critical inventory processes.
Inventory Opportunities
Gradient’s solution automatically alerted the team to critical inventory metrics and events, tailored to the organization's specific configurations. This functionality helped users pinpoint opportunities to maintain production continuity or sales delivery, reduce stock, and enhance working capital efficiency. Operators could navigate the value chain ontology, determine optimal actions to resolve issues, and comprehend the ripple effects and dependencies of even simple tasks, such as relocating production from one site to another.
The Impact
The implementation of Gradient’s AI-powered solutions had a profound impact on the HVAC manufacturer's operations:
Enhanced Forecasting Accuracy: The company increased forecast accuracy by up to 30%, reducing the forecast error rate from 25% to 17.5%.
Improved Inventory Turnover Rate: The inventory turnover rate improved by approximately 20%, increasing from 4 times per year to 4.8 times per year.
Reduced Stockout Rate: The stockout rate decreased by 40%, reducing incidents from 10% to nearly 5%.
Cost Savings: The company saw significant cost savings in the first 6 months, trending towards 10-15%.
Conclusion
By leveraging Gradient Agent Foundry, the HVAC manufacturer significantly improved its inventory management processes. The enhancements in demand forecasting, supply chain management, and inventory cost optimization led to increased operational efficiency, reduced costs, and improved customer satisfaction. The success of this implementation has encouraged the manufacturer to explore further opportunities for automation, ensuring continued improvements in their operations and services.