Airgas Leverages JDA Solutions and Services to Better Balance Supply and Demand and Manage Growth
For any company that manages production, purchasing and distribution lead times, changes in customer demand can pose a serious challenge. When multiplied across a network of approximately thousands of locations, numerous distribution facilities and various sales channels, companies need to leverage a truly world-class supply chain management solution to overcome this exacerbated challenge.
Airgas, Inc. found such a solution in JDA Software's world-class supply chain management solutions. JDA helped Airgas reposition inventory to precisely where and when it is needed. In the process, this successful industrial distributor substantially reduced its overall inventory costs, improved service levels and supercharged its ambitious growth strategy.
Serving a Vast, Complex Network
Airgas is the largest distributor of industrial, medical and specialty gases and welding equipment and supplies in the U.S. The company is also one of the largest national distributors of safety products, a leading source of nitrous oxide, dry ice and liquid carbon dioxide, as well as process chemicals, refrigerants and ammonia products.
The company employs more than 14,000 associates and serves a diverse customer base that includes welders and metal fabricators, construction firms, hospitals and clinics, nursing homes and home healthcare providers, equipment manufacturers and research laboratories.
Building an Infrastructure to Support the Business
To meet the needs of its diverse customer base, Airgas built a nationwide distribution platform across multiple channels, including retail branches, distribution centers and inbound and outbound telemarketing centers. Airgas' integrated network consists of approximately 1,100 locations, from retail stores serving walk-in customers to large distribution centers (DCs) strategically located across the U.S. Airgas also manages a fleet of more than 5,000 delivery vehicles, 13,000-plus bulk gas tanks, more than 10 million gas cylinders, specialty gas labs and air separation units. The company also manages a national network of dry ice facilities, liquid CO2 plants and nitrous oxide plants.
Such a large business network alone presents unique supply chain challenges. However, Airgas has raised the bar by setting and meeting ambitious goals for growth and profitability.
Airgas implemented an aggressive business strategy driven by organic growth and numerous core, product-line and strategic acquisitions. In fact, the company's revenue has grown by almost 300 percent over the last eight years. To support that exceptional growth and to integrate and manage those many acquisitions, Airgas worked hard to improve its operating efficiencies through the optimization of production, distribution and administration processes. In 2002, the company began to take dramatic steps to drive costs out of its systems and to leverage a process-oriented approach to procuring and delivering hard goods and safety products to its customers.
Prior to that, Airgas used a mixture of legacy systems and industry-specific solutions to manage demand. However, those systems were not integrated and could not scale to keep up with the company's rapid, acquisition-fueled growth. On top of those limitations, each of the company's 12 regional operating companies ran its own version of a demand management solution, further complicating the need to manage almost 3.5 million items in a complex wholesale distribution environment.
As a result, Airgas lacked the enterprise-wide view of supply and demand needed to optimize inventory, reduce costs and drive customer satisfaction.
Streamlining Demand and Fulfillment for Better Visibility
To solve its critical inventory balancing challenges, Airgas began evaluating automated demand and fulfillment systems.
The company wanted a truly integrated supply chain management solution, one that would link suppliers and sub-suppliers, internal operations, trade customers, retail customers and end users. Airgas also needed that solution to govern the management of material, information and funding flows. After a thorough review, Airgas selected JDA Demand andJDA Fulfillment to address its business challenges and achieve a global view of its inventory.
"We began with a phased rollout of JDA's Demand and Fulfillment solutions to our national DCs in 2002. In 2003, we deployed the system to our three regional purchasing centers that support our 850-plus retail branches," said Nate Miller, director of enterprise systems at Airgas. "We worked closely with the JDA Services team to customize the applications to meet our business requirements and implementation deadlines."
According to Miller, Airgas implemented additional functionalities of JDA Fulfillment in the following years, including the solution's dynamic deployment and automated statistical safety-stock modules. In 2008, Airgas again collaborated with the JDA Services team to upgrade to the latest version of the JDA Demand and JDA Fulfillment solutions to improve demand and fulfillment performance.
"The JDA Services team's in-depth knowledge of the solutions and their understanding of our business requirements and configuration needs were key factors in our successful upgrade," Miller explained. "By having JDA Services involved in the implementation, I felt like our implementation partner had more skin in the game. The Services team provided best practices with the deployment of the demand and fulfillment solutions to support our company's growth over the past several years."
Improving Demand Forecasting and Inventory Management
Airgas leverages JDA Demand to manage more than 1 million demand forecast units and uses aggregation and reconciliation to forecast at multiple levels. The company generates monthly forecasts and publishes updates that are made by the demand planners daily. Relying on three years of historical data and advanced demand classifications, Airgas can now generate 12-month forecasts to support its vast nationwide operations.
JDA Fulfillment allows Airgas to manage 250,000 unique items, including 912,000 stocked SKUs and more than 2.5 million non-stocked SKUs through its network of 1,500-plus vendors. The company runs its fulfillment plan nightly, generating more than 4,000 purchase orders in a typical business day. It leverages a seven-day, look-ahead schedule and a 60-day planning horizon.
The dynamic deployment capabilities of JDA Fulfillment provide an enterprise-wide view of inventory, which Airgas uses to identify surplus and dead inventory and to transfer those products to locations where demand exists. Airgas now employs this dynamic deployment functionality in its nightly replenishment process, enabling it to precisely calculate surplus inventory and create shipping lanes based on more accurate source and destination information. Additionally, JDA Fulfillment's statistical safety-stock module enables Airgas to automatically determine the appropriate safety-stock levels based on statistical data.
Those and other improvements have yielded measurable bottom-line results for this growing industrial firm.
"Once we had an enterprise-wide view of inventory, we saw dead or surplus stock in some locations while there was demand somewhere else," Miller explained. "Now we analyze the financial and logical reasons for moving inventory and often transfer inventory between locations before we buy it from a supplier. We don't move inventory for the sake of moving it, we move it to where there's an immediate need for it, and JDA enables us to do that."
Every inventory transaction is treated as a priority and is no longer dependent on supplier lead times. This integrated, network-wide approach has helped Airgas dramatically accelerate order fill times. The company benefits from faster deliveries, which translates directly into better service and happier customers.
Better Supply Chain Management Supports Airgas' Growth
Miller reported that Airgas has achieved a number of other benefits from use of the JDA Demand and JDA Fulfillment solutions. For example, a reduction in days-on-hand inventory has significantly lowered the company's overall inventory costs. By enabling offline collaboration and the sharing of forecasts, Airgas now works more closely and efficiently with large suppliers. Airgas can continue to pursue its ambitious growth strategy with better control over demand and supply.
"While we have grown revenues over the past eight years by almost 300 percent, we have only added 10 new buyers and planners in our purchasing centers," said Darrell Inbody, national purchasing manager at Airgas. "Since the JDA applications are scalable and easy to use, our associates can handle a lot more work."
Throughout an eight-year timeframe, Airgas has realized the following results with the support of JDA:
Building Integrated Distribution Success
Airgas continues to expand its nationwide integrated distribution network, adding new products and services and exploring new distribution channels to complement its traditional branch-based sale of gases, welding supplies and equipment.
To support this broader offering and more complex channel structure, Airgas managers have made use of integrated and consistent information, as well as an improved procurement and logistics infrastructure. Supported by JDA Demand and JDA Fulfillment, that integrated approach allows Airgas to put products where and when they are needed at the lowest possible cost. In today's competitive wholesale distribution business, that's a formula for long-term success.