LKQ Europe transforms auto parts forecasting through data-led project

Date: Friday 25 November 2022

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o9 Solutions, a leading provider of AI-based supply chain transformation, has announced that it has improved the forecast value added (FVA) of LKQ Europe by almost 20% through a pilot programme.

The project vastly improved LKQ's demand and supply sensing capabilities, and created a more agile supply chain for the automotive aftermarket distributor, including reducing the bullwhip effect.

As a result, LQK has now rethought the orchestration levers that can be pulled in the future to make better supply chain decisions, according to independent analyst Supply Chain Insights.

Co-founded by o9 and Supply Chain Insights, Project Zebra is an open-source industry effort to define and activate outside-in processes to prove the value of outside-in supply chain planning processes.

The Project Zebra research focused on using outside-in market data to improve the company’s demand and supply sensing capabilities and create a more agile and profitable supply chain. The study also tested how bi-directional orchestration versus the more traditional approach of multi-tier inventory optimisation could improve LKQ Europe’s inventory buy plan.

The results of the pilot far exceeded LKQ Europe’s expectations. When the company incorporated o9’s machine learning capabilities and market-driven data into the process, the Forecast Value Added (FVA) improved by 17.3% - giving LKQ Europe unprecedented insight into market signals. LKQ Europe also captured significant insights by measuring the impact of the bullwhip effect as part of the Project Zebra pilot programme. With the bullwhip effect, very small variations at the demand level can become distorted and amplified throughout the supply chain. The higher the bullwhip effect, the higher the likelihood companies will experience issues that include expedited shipment costs, excess inventory and lost sales. Using o9’s predictive analytics and external market signals, LKQ Europe reduced the bullwhip effect on its business from 48% to 37%. Through Project Zebra, o9 built a solution to measure and quantify the impact of bullwhip amplification on supply chains by leveraging a bi-directional simulation model.

“For some time, I had been convinced of the power that outside-in planning could have on our supply chain,” said Nicole Miara, Digital Transformation Lead, LKQ Europe. “Our participation in Project Zebra was quite the eye-opening journey. This wasn’t a software or IT project but rather a business implementation project that came with a fantastically diverse group of data scientists, business leaders, and supply chain professionals who are part of the Project Zebra think tank community. The outcome of the pilot has led us to rethink the orchestration levers that can be pulled in the future to make better supply chain decisions based on market, supplier, and channel data.”

“With only 3% of the market willing to adopt new approaches to solving supply chain problems, Project Zebra attempted to break through the loggerhead of traditional sales approaches for commercial engagements to implement yesterday’s solutions. Supply chain leaders need to question the outcomes of traditional planning by testing and learning through efforts like Project Zebra. Congratulations to LKQ Europe for its work as a supply chain innovator,” said Lora Cecere, Founder of Supply Chain Insights.

Fred Baumann, Vice President, Global Industry Solutions at o9 Solutions, said,

“We applaud Nicole and her team at LKQ Europe for putting their confidence in Project Zebra and trying something completely new. We focused on using market-driven forecast data that incorporated inflation signals, as well as logistics signals around lead time predictability and variability to help LKQ Europe better sense their customers’ and suppliers’ reaction to changing market conditions and visualise the impact on their business early on. This important research has the potential to set the global standard for how companies use data to forecast demand and make supply chain decisions.”

To learn more about Project Zebra, visit zebra-project.org.

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