How a Parts Intensive Wholesaler Keeps Optimal Inventory of Slow-Moving Items

Thrive helps General Air Services see fill rates for parts soar to 88%

  • General Air, a gas and welding supplies distributor, was having trouble managing its low-volume SKUs.
  • Its targeted fill rate was 80%, but it was having trouble reaching that mark.

  • After implementing Thermostock, General Air’s fill rate for those items rose to 88% consistently.

  • Download a one-page summary here.

General Air has a simple mantra: the right product, right process, right solution.

While the mantra is simple, the journey to becoming the largest independently owned welding supply company was anything but.

General Air opened its first store in Denver in 1969 with just three employees. Fast-forward 54 years and General Air now has eight locations, providing all of the gasses, equipment, and specialized services that its clients need.

But with growth comes challenges. In 2022, General Air presented one such challenge to Thrive Technologies about finding a new digital solution: how to elevate its transfer fill rates for slow moving parts so that it can consistently have the right product, at the right branch, at the right time.

The Challenge

General Air was looking to improve on its back order percentages and transfer fill rates, specifically from low-volume SKUs, which make up the vast majority of their SKUs. 

In 2018, General Air had 232,591 total active SKUs across all locations. Of those total SKUs, 97.8% of its SKUs sold less than 10 times within the previous 12 months.

With the approach General Air was using, a hub and spoke model, it required each store manager from their respective locations (eight in total) to go to the main hub, go through their paper invoice to manually input the items they needed, and repeat the process each day.

Like many wholesale distributors, General Air saw what a big time commitment it was for the buyers to do this process manually each day, taking away from other tasks that they could be doing.

“I hear it from the operations side of things for what a big waste of time that was for everyone,” said Tara Cunningham, purchasing manager at General Air.

Due to the manual process, “everything” was reactive when it came to decisions being made in regards to low-moving inventory. General Air, at any given time, has about 20,000 stocked SKUs and, per Cunningham, manual stock levels wouldn’t be evaluated until there were issues.

They needed a better way to improve those fill rates, and that was just one of the pain points, though.

Others include:

  • The feeling of not having “anything” as far as inventory goes

  • Limited physical space

  • Different sizes for each location

  • High amount of dead stock (i.e. inventory that is no longer selling)

But the biggest one was ensuring that they would be able to have the right product where it was needed. Because without ensuring that the items are available, General Air ran the risk of lost sales.

It comes back to the General Air mantra. The right product, right process, right solution.

The product was right, but in order to get to the right solution, the process needed to be addressed.

The Solution

Like any industry leader, General Air has internal metrics in place to measure its success, known as Key Performance Indicators (KPIs). For the aforementioned transfer fill rate for slow-moving items, the internal goal was set to 80 percent, meaning that they would have the required part in stock at their main hub that one of their locations would need.

General Air was lower than that 80 percent mark with the manual process it had in place.

With General Air already using Thrive Technologies’ buying system, it decided to look into one of Thrive’s newest technologies, the patent-pending Thermostock®, in early 2022.

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. 

"The biggest difference after implementing Thermostock is that I do, 100 percent, have more awareness for why things are the way they are"

Some key features of the technology include:

  • Automate 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.

  • Automate Min/Max: Thermostock analyzes the latest inventory characteristics to calculate the optimal Min/Max, sending recommendations back into your ERP system.

  • Redistribute: 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.

Thrive worked with General Air to set up inventory policies at an algorithmic level that were specific to its goals, workflow, and company, given that the industrial welding industry has slower unit movement than some other industries, to create a data-driven approach to helping General Air reach its goals. 

“It was figuring out what would work best for us and meet our goals for areas that we wanted to improve inventory wise and setting specific policies for those,” said Cunningham.

Thermostock is able to set these inventory policies by using a dozen-plus characteristics of SKU sales, including client breadth and key accounts.

The Successes

When Cunningham presented the idea of Thermostock to the General Air’s key management, they were on board, but wanted to see if the proof was actually in the pudding. 

“It helped to pull real-life examples of SKUs to explain the new quantities to the buyers. We could show the reasons why we adjusted the stocking quantity from the original quantity,” she said. “Once we had that, it was a no-brainer.”

Cunningham describes herself as being “data-oriented,” which goes hand-in-hand with Thermostock and the ability the technology has in helping wholesale distributors.

"It helped to pull real-life examples of SKUs to explain the new quantities to the buyers"

Not only does using the data at hand help with countering arguments if a branch manager says they are “always out of something” by helping show what is actually happening and validate any claims, but it also shows the big area that is often absent from a company’s planning – the why.

“The biggest difference after implementing Thermostock is that I do, 100 percent, have more awareness for why things are the way they are,” said Cunningham. “It’s an easy way to show and explain to people why they are seeing the inventory levels that they are.”

While buying will always be done at some sort of emotional-driven level, as Cunningham admits, the data helps to challenge those approaches, and it, arguably more importantly, helps to free up more time for the buyers who would have to handle the process manually daily for thousands of SKUs.

But what about the KPIs? That was the main reason that General Air wanted to change its process in place as it wasn’t consistently hitting the 80 percent transfer fill rate for parts.

Per Cunningham, General Air, post-Thermostock implementation, is consistently at 88 percent – well above its 80 percent target. She said that it will gradually bump up its expected mark to “probably 85 percent” and hopes to get to consistently 90 percent moving forward.

What’s more, the previous 97.1% of SKUs selling 10 or less times a year has drastically improved since 2018 and since implementing Thermostock, General Air has reduced the percentage of low-selling SKUs down to 50.6% of their total SKU’s.

“(Thermostock) gives us a good overall view for what we strive for. Thermostock automatically helps us get more microscopic on the fill-rate percentage by location, and we can tell if one location has a low fill rate but everyone else is doing well,” she said.

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