A large Canadian plumbing, heating, and electrical wholesaler was seeing its inventory rise and rise dramatically, but was struggling with its turns fully making sense about why certain products were stocked where they were.

Having 31 distribution centers, this company had about 300,000 SKUs across all their locations. Their manual analyses helped with a small percentage of SKUs but it had no comprehensive solution for its massive amount of dead stock. 

 “The tools I’ve built allow us to analyze some SKUs but Thrive’s solutions analyze ALL our SKUs across all our DCs”, said the VP of Operations.

The Challenge

When the company reached out to Thrive to see how we could help, it had three goals that it wanted to accomplish:

• Over the past few years, its inventory has increased dramatically, and it wanted to bring it back down/increase turns. It had inventory dispersed in places based on branch/buyer emotion. It needed accountability as to why it should be there, and move it/get rid of it if it's not needed.  
• Take emotion out of buying decisions. Branch managers have influence over local buyers who will stock too much. It needed a consistent approach to Stock/Non-stock decisions. At the time, it was all emotion at the local level. 
• Identify overstock inventory and move it back to DC and/or other branches. 

Thrive looked at the data and realized that this company had a lot of dead inventory and SKUs that weren’t selling at all.

In May 2023, the company’s amount of dead inventory in dollars as a percentage of total inventory dollars was 14.4%. What’s more, the number of Stocked SKUs that didn’t sell at all in the last year was 86%.

Eighty-six percent.

The Solution

Looking at not only the data, but also the goals, it was clear that an automated and comprehensive analytical approach was needed in order to curb the emotional decisions that were being made, leading, in part, to the high amounts of dead stock.

Thrive introduced this client to our patent-pending digital technology, Thermostock.

Thermostock is a digital solution that works with your current ERP system, which automatically identifies and optimizes low-volume SKUs, allowing wholesale distributors to take control of their inventory. 

Some key features of the technology include:

• Automated SKU rationalization: Thermostock analyzes recent sales of all your stocked SKUs. Those not sold in the last 12 months are marked as nonstock or special orders, ensuring that your non-selling SKUs are not purchased, preventing dead stock.
• Best practice inventory policies that can be configured: Define policies around the specific goals you want to achieve.
• Automated Optimal Min/Max: Thermostock analyzes the latest inventory characteristics against personalized policies to calculate the optimal Min/Max every month, sending recommendations back into your ERP system.
•  Rebalanced overstock: Thermostock recommends a monthly rebalance of overstocked low-volume items to other locations that are still selling those items. This feature prevents unnecessary new inventory purchases, lowering the Cost of Goods Sold (COGS). 
• Data-driven optimization: Leveraging machine learning and AI, Thermostock continuously learns and improves over time to provide ongoing optimal inventory recommendations even as sales fluctuate.

What was key in the discussions with this client is that they bought into the data-driven approach, knowing that its ERP system on its own was either missing items or was slow to react to change.

We like to call these blind spots unpredictable demand and large changes in demand and supply.

ERP systems, like the one this client was using, do a decent job managing the high-volume SKUs, but these systemsaren’t able to provide an accurate forecast on – or manage appropriately – the C and D items. The reason is because purchasing systems like those in ERP system have been built with the antiquated assumption that each SKU will sell at least 20 times per year, when in reality, more than 85% of stocked SKUs sell 10 times or less per year.

Such was the case with this client, and a change was needed.

The Successes

The results weren’t just impressive, but they were quick, too. Thermostock integrates directly with your ERP system to leverage the investment that you made.

One of the benefits of our solutions is that the implementation time is less than 30 days per module, compared to 6-12 months to implement a new purchasing system.

And that quick turnaround was key for this client, as it saw monumental changes in its data in just four months.

In August 2023, it saw a 46% reduction in its dead stock from May, taking it down from 14.4% of overall inventory to just 7.8%.

By working with the client to set up inventory policies based on their needs, Thermostock recalculates and delivers optimized Min values to the ERP system on the low-moving parts that this client was not able to manage successfully before.

Thermostock automatically identifies and optimizes low-volume SKUs, allowing your buyers to focus on your best selling items. Wholesalers understand that buyers don’t have enough time to manually go through the hundreds of thousands of SKUs manually on a regular basis.

Also, remember that 86% of Stocked SKUs that this client had that didn’t sell at all in the last year? After turning on Thermostock, that number dropped to 0% as the amount of stocked SKUs with no sales in the past 12 months automatically gets turned to Nonstock in your ERP – save for special orders or SKUs that you identify.