Background and Targets
From Tolentino in Italy’s Marche region, Arena designs, commissions and wholesales waterwear, sports apparel and equipment around the globe. It outsources manufacturing to Europe and the Far East. A global brand running wholly owned subsidiaries and exporting to more than 100 countries, it runs a multi-level distribution network centered on a global DC in Italy and 2 regional DCs in France and the USA.
Larger retailers, Arena’s main customers, have the power to impose terms. They are ordering more and more frequently, in smaller quantities and demanding ever-shorter lead times to match consumer demand better. Arena needed to respond. When the project started in 2017, only 35% of production was made to stock and the rest should have been made to order. However, given it can take four and a half months for products to arrive from the Far East, this was not sustainable, and Arena was forced to order up to 60% in advance.
The decision to adopt an advanced planning tool is part of the company’s strategy for improving its capacity to fulfill pull-based demand. In the preliminary phase Arena structured its assortment in clusters based on supply constraints and sales opportunities. Each cluster was then managed with a specific service level and stock policy. The goal was to rely more on fulfillment and redistribution from stock and to increase availability while releasing working capital by reducing the total inventory value. “The choice fell on RELEX for the computational power of its software, its expertise in the fast-moving consumer goods sector and its track record in optimizing inventory levels”, says Giorgio Farinelli, Arena’s Supply Chain Director.
Previously, Arena managed ordering in Excel; both that from suppliers to the central DC and from the latter to regional hubs. Forecasting was also calculated in Excel and was based on historic sales and adjusted by regional managers to reflect financial targets. Irregular demand peaks, such as large orders from major customers, were added to forecasts manually.
One of the main goals of the RELEX project was to produce a more accurate sales-based forecast for both seasonal and continuous products. Arena also wanted to automate the bulk of its order creation from suppliers to the main DC, as well as distribution orders from the main DC to the regional DCs.
From July 2017 the implementation initially focused on seasonal products. Previously, variations in size profiles between markets and styles had made it difficult to produce accurate demand forecasts at a SKU level. Without the need to involve its R&D department, RELEX was able to create a function that analyzes historical sales data and produces a demand forecast that accurately reflects sales by size. To this aim RELEX uses the Business Rules Engine, which allows users to use filters, and to designate and automate actions for the filtered set of results.
Another challenge was the need to consider the order restrictions imposed by suppliers. Previously, the Arena team spent a considerable amount of time rounding orders manually, whereas now RELEX’s system takes these constraints into account automatically.
Five months after the implementation’s start, a forecasting, replenishment and allocation solution was in place for managing three order cycles per season with a focus on the current season. The project then progressed to dynamically encompass multiple seasons and order cycles as per Arena’s needs. Next, Arena’s continuous product lines will be replenished using RELEX’s integrated supply chain approach, which bases the forecast for the central DC on the order projections of the regional DCs.
Before implementing RELEX, Arena’s planning team was preoccupied with routine ordering tasks and had little time left to optimize its orders to align better with the corporate targets. Now Arena has achieved far better visibility over its supply chain, planning is now supported by high quality data, and orders are calculated far more accurately and in mere minutes. This allows Arena to keep closer control of demand planning, without the need to expand its team.
“The system can perform calculations quickly despite the huge amount of data,” says Claudio Perna, Arena’s Planning and Inventory Manager. “This allows us to produce numerous iterations during the order cycle and react quickly to any situation that arises.”
RELEX has played a key role in supporting the evolution of Arena’s supply chain processes towards a more holistic control of its entire customer-fulfilment chain. Since RELEX was introduced, order cycles per year have increased from 6 to 12 and order cancellations have decreased significantly. In other words, Arena’s customers are able to place more frequent and more precise orders responding more accurately to consumer demand. The process is still ongoing but, overall, the impact of both the improved processes and the use of the system has been very positive.
“What impressed me was the way that RELEX stuck by us until we got everything right,” says Giorgio Farinelli, Arena’s Supply Chain Director. “There was a lot to learn and our confidence in the tool has been growing month after month. We’ve ended up with a cutting-edge solution and it’s been an amazing journey.”