Stock answers that rise to the demand

Click to follow
SOFTWARE designed by a US mathematician because he hated travelling is bringing hope to beleaguered British businesses. In just a few years, the LOGOL system of stock control guru R G Brown is being used by blue-chip companies on both sides of the Atlantic.

The reason is that few things are as annoying as ordering something only to learn that it's out of stock. Customers are irked and so are businesses. A potential sale is lost and a customer has been given a reason to go to the competition.

Stock control is one of those management areas where the theory and practice differ sharply. The theory is straightforward: order enough to meet forecast demand, plus a calculated amount to meet variations. But in practice, shelves are often full of the goods customers are not demanding, and bereft of those which they are.

The problem is not ignorance. Business courses have taught the theory for 30 years, often using texts by R G Brown, the first of which was published in 1959. But because of the mathematics and the amount of data to be analysed, the problem cried out for a computer.

Surprisingly, software producers seem to have fought shy of it. The reasons are complex, said Ian Walker, a partner in KPMG Peat Marwick's Centre for Manufacturing and Logistics Consultancy. In the Sixties and Seventies, he said, software producers and customers focused on systems that recorded stock rather than managed it. Computers told users how many goods were on which shelves, rather than how many ought to be there.

In the Eighties, he said, suppliers concentrated on software for 'materials requirements planning' and Japanese-style 'just in time' systems. Companies would know how many widgets were required for their washing machines, but not how many washing machines they needed to stock.

Faced with this gap, a number of American companies started to employ R G Brown, a former vice-president of Curtiss Wright aeronautics and a consultant with Arthur D Little, who had won a wide audience through his writings on stock control. For him, this meant a lot of travelling. Tiring of this, he started work on his LOGOL system, which would produce the right answers without his being there. It is essentially an add-on to a company's existing computer.

Typically this involves demand forecasting (an area in which Mr Brown considers himself an expert) and rules for re-ordering, although there are other modules. LOGOL has so far been hooked up to the offerings of 15 software vendors, says Barrie Webster of Mercia Software, the Birmingham- based distributor.

Mr Webster, another inventory management specialist, got to know Mr Brown by corresponding with him while studying mathematics at Nottingham University. He said that despite the price tag (the base price of pounds 40,000 makes LOGOL probably the most expensive piece of PC software in existence), interest and sales have been high.

Such names as Compaq, General Motors, Volvo, Wellcome and Reckitt & Colman head a list of apparently satisfied users. Some have bought it many times over: Coats Viyella is outfitting its 10th site; ICI Pharmaceuticals has 26.

Mr Webster's central selling point - that proper stock control allows businesses to reduce stock by as much as 40 per cent while increasing service levels - seems borne out by the users. Castrol, for instance, took 18 months to achieve a 30 per cent reduction; Coats Viyella reports inventory reductions after a year.

If this seems a long time, remember the underlying irony of stock control: the goods that companies want to get rid of are precisely the goods that are not moving. And although such users as Canon and Jeyes talk about LOGOL's usefulness during the recession, KPMG's Mr Walker warned about the importance of good stock control in the better times ahead.

'Over-trading and difficulty with cash flow are classic end- of-recession problems,' he said. 'Now is the time to sort out stock control.'