Interview: Bosch Rexroth Canada

Name: Joe Fletcher

Job Title: Inventory Analyst

Company: Bosch Rexroth Canada

How long have you worked for Bosch Rexroth Canada?

5 Years

What does your company do?

Bosch Rexroth Canada provides drive and control solutions in the major technology areas of Industrial Hydraulics, Electric Drives and Controls, Linear Motion and Assembly Technologies, Pneumatics, Service and Mobile Hydraulics. We distribute products to end users, OEMs and resellers via a national distribution network that services all areas of Canada. This includes an engineering and fabrication group that works hand in hand with customers to engineer, design and construct custom hydraulic power units to meet their specific needs. We also provide in-house evaluation and repair services for our components as well as service technicians who are on the road to provide support to customers on site.

How long have you worked as an inventory analyst?

2.5 Years

During your time in this field, what changes have you seen?

Extended factory lead times; economic downturn in domestic manufacturing; increased pressure from off-shore products manufactured in developing countries.

Is it very different from when you first started out?

Yes. There are various negative market influences that we have to contend with in our current business environment.

Our company supplies various markets that have experienced a severe economic downturn in recent years. The most prominent of these is the North American automotive sector, with the "Big Three" US manufacturers posting annual losses, reducing workforces and cutting back on capital expenditures. We supply these customers via direct sales of components and spare parts for the various pieces of manufacturing equipment that they have in their plants as well as supplying the OEMs that build equipment for the automotive industry. As these manufacturers of hydraulic presses, materials handling equipment, machine tools etc. suffer as a result, so do we experience the effects of this slowdown in the automotive sector both through direct and indirect sales.

There are various other areas of the Canadian Manufacturing industry that are in decline as indicated by industry losses of nearly 100 000 jobs in 2005 and 60 000 jobs in 2006. While some of this is related to the automotive sector there are other industries that have been affected such as textiles, steel, forestry, lumber mills, pulp and paper. We suffer as a result of this economic downturn as we supply these industries as well as their sub-suppliers--similar to our relationship with the automotive industry. In the forestry sector, for instance, we supply some major OEMs that manufacture forestry and tree harvesting equipment as well as lumber mills and pulp and papers mills. As the demand from the mills declines, so do the demands for wood and consequently the demands for new forestry equipment. So the effect of a slowdown in one area of the industry such as the mill which we may supply directly may have further impact upon other areas of the industry such as an equipment manufacturer who we also supply.

Part of the cause of this slowdown has been the rising value of the Canadian dollar versus the US dollar. In January 2003, the Canadian dollar was worth $0.63 US while today it is worth $0.94 which makes the Canadian market less attractive to foreign investment. Numerous Canadian companies are subsidiaries of their US parents and while they used to get more bang for their (US) buck opening facilities in Canada, this economic advantage has decreased. More and more companies are looking to invest in low cost countries where their dollars go much further. This is reflected in the economic explosion seen in China, India, Brazil and other developing countries.

As these market conditions change, we must adapt as a result. We continue to attempt to diversify our customer base into other industries that we may not have been heavily involved in, as well as try to increase sales to customers whose business remains strong. In this case the oil and gas sector remains a very strong industry particularly in the Alberta oil sands, and we hope to be able to take advantage of this while other industries recover from the problems that they have been experiencing. This is expected to happen as the automotive industry's restructuring efforts are completed and companies realize some of the dangers associated with manufacturing in developing countries. These problems are evident in the quality of some of the products that comes from these areas and has been highlighted in the media recently with massive recalls on products made in China.

How has your job changed as a result?

More importance is being placed on maintaining "leaner" inventory levels versus past years when sales were high and surplus product was less of a concern. We are now placing greater importance on internal efficiencies such as lean inventory levels in order to improve profitability in a difficult market environment.

What is your opinion on the future of Supply Chain Planning?

With increased competition from developing markets it is essential to improve domestic operations to remain competitive. This involves decreasing inventory holdings and associated costs and properly forecasting future usage in order to quickly respond to customer demands by having product on the shelf available for sale. If you are unable to supply your customer as they request, they may go elsewhere for their products and it may be difficult to get them back.

What personal challenges do you face on a day to day basis in your job?

Raising awareness about the perils of carrying too much inventory amongst individuals on the sales side of the business. Their primary concern is sales and extensive stockholding makes it easier to sell things as you can tell customers that you have a wide array of product on the shelf. It is often the case that they will agree to keep even more inventory for customers who say that they are interested in certain other products. They sometimes don't properly consider/make allowances for the fact that if a customer isn't committed to purchase this inventory which they have agreed to hold for them, we can get stuck with unusable stock. We refer to this type of stocking as a "handshake agreement" and find that we have been told to keep product for customers who never end up purchasing it.

How do you overcome these?

Monitoring stock levels and evaluating changing usage patterns. We have also implemented agreements with customers that they are responsible to purchase an agreed upon safety stock level that we guarantee to maintain for them in the event that they change their requirements or we see no usage over a 6 month period. Anything above and beyond this level that we keep to maintain the proper flow of product is our liability if they stop purchasing the product but we at least share some responsibility with the customer in relation to minimum levels. This helps us capture "handshake agreements" and give us some recourse to dispense with this inventory should the customer alter their requirements.

What software packages do you use to assist you with your job?

Optimiza; Crystal Reports

What is your hot tip to others who do a similar job to you?

Act early/act often to dispense with dead/unmoving inventory. This can be done via product returns to vendors; conversion into active products and/or sales promotions. If one waits too long to act it may become an unmanageable task with products too old to send back; too old to be able to utilize in other components or simply undesirable in the market. This leaves little alternative but to write off the products as scrap. Acting early will free up more capital to invest in products that are active or expand the product range which you keep in inventory. This will hopefully increase customer service, expand the product ranges being sold to existing customers and allow you to capture new customers.