Seco Tools: Cutting Edge Supply Chain Strategy Takes Shape

Seco Tools manufactures cutting tools made of steel, tungsten carbide and cobalt. The tools are based on industry standards which allows each customer to select their supplier. If a tool cannot be supplied when it is needed it is very easy for the customer to secure a new supplier. The burden is now on Seco Tools to deliver any of its 50,000 SKUs anywhere in the world within 24 – 48 hours.

Historically, customers held their own inventory. They kept a supply of products on hand at every site. This became an expensive proposition for the industry, which gave way to placing the responsibility (and cost) back on the manufacturer to hold inventory and deliver it when needed. At first manufacturers held stock in-country. This created a vast and costly distribution network for manufacturers such as Seco Tools. As competition increased and margins thinned, manufacturers had to turn to a more streamlined distribution approach that would still ensure quick delivery of each item.

As part of this shift, Seco Tools now operates four distribution centers around the world (Netherlands, Troy, MI US, Singapore, and Shanghai). From these four locations the company serves approximately 60 countries. The key is the ability for Seco Tools to provide the same level of service through fewer distribution points.

Supply Chain Planning Overhaul
Three years ago Seco Tools investigated solutions for stock optimization. During this process, the company realized it needed more than stock optimization—it required a complete supply chain planning overhaul. According to Lars Liljeqvist, VP Logistics, Purchasing and Quality, Seco Tools, “We saw an opportunity to improve our stock availability and lower our inventory value at the same time. We also realized this would be more than a software implementation. In order to succeed, we needed to change our processes and way of working.”

Seco Tools required new software to support the new processes and they started to evaluate potential partners. Many of the vendors only offered software. Seco Tools recognized they also needed help with their process change. “Logility was unique. The team met with us and started to discuss how we could improve—the supply chain processes and organization. We walked through the process and covered both the tangible and intangible benefits. Then we talked about how software could help enable this transformation,” Lars continued.

Moving Forward
Previously the company’s forecasting operated at a very high level (for example the product/family). To be truly efficient, Seco Tools needed to forecast at the item level by stock location to help its 12 production facilities better plan their manufacturing requirements. “We must make sure we produce and stock only what we need,” Lars commented.

Seco Tools recently completed the first phase of its implementation of its new processes and Logility Voyager Solutions. Within the first week, a couple of days in fact, the team noticed a drastic improvement in visibility across the global business which will help further improve forecast accuracy.

“We have a target to achieve a 97% net stock availability and we can already see with Logility we will be able to achieve this number,” Lars said. Seco Tools is also aiming to reduce inventory up to 20% thanks to the greater forecast accuracy. In a competitive industry manufacturing precisely machined tools, a reduction like this can add up quickly.

Lars continued, “The implementation was on time and the visibility we now have gives us new understanding. We’re asking questions we never would have thought to consider before Logility. The combination of an excellent supply chain team, improved processes and new software has shown us just how much potential there is for improvement. It is quite remarkable.”