Led Stores improved inventory management/cashflow

When Ledstores started selling LED strips in 2012, ecommerce was still in its infancy. Ten years later, no-one can ignore the Ledstores webshops anymore. In the UK, the company is active with the webshop Ledpanelwholesale and in another ten European countries via country-specific webshops. Read the story of Ledstores, who were forced to change their stock and purchasing strategies due to their growth and the increased demand for LED lighting. Data-driven purchasing gave Ledstores more insight into seasonal demand, improved the cash flow position and automation shortened the replenishment process.

What was the biggest purchasing challenge for Ledstores?

Operational purchaser Nicolas Lubbers explains: “We were especially struggling to adjust purchasing decisions to seasonal demand. We purchased with a strategy in which it was only clear what we needed on average to meet customer demand. Due to the limited visibility of the demand per season after the winter season – our peak season – we continued to purchase according to an average. That meant that we held too much stock during the summer period, for example.”

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What consequences did the limited insight into seasonal demand have for the purchasing of Ledstores?

The lack of insight into demand per season had consequences for the cash flow situation. Nicolas: “In the summer months it was difficult to continue purchasing. There was already too much stock and partly made up by the wrong products. As a result, we were unable to purchase products that were in demand during the summer.” Due to the lack of cash flow, it was difficult for Ledstores to achieve a continuous purchasing rhythm and thus to meet customer demand without interruptions.

“The cash flow within Ledstores is so important, because we have no external investors. That is of course a healthy situation, but it does mean that cash flow is very important to support a continuous ‘purchase flow’.” Nicolas says that some purchase orders were delayed due to the lack of capital. ”Sometimes the containers with products arrived a month later than planned. The delay meant that we were unable to meet customer demand directly. That led to many backorders and lost sales.”

3 Challenges for Ledstores were

1. Purchasing without insight into seasonal demand
2. Limited cash flow available for new purchases
3. Backorders and lost sales due to delayed purchase orders

How did Ledstores get the stock and purchasing under control?

Due to the cash flow problem, Ledstores was not able to control their stock management. The excess stock that Ledstores created by not adjusting their purchasing decisions to the seasons resulted in insufficient cash flow being available for new purchases. t was clear to the purchasers of Ledstores that the working method had to be adapted in order to be able to grow and to minimise the number of backorders and lost sales.

Nicolas indicated that starting to use a specific purchasing tool such as Optiply has been a major step forward. “The purchasing process has completely changed. Much more is known about seasonal demand and what needs to be purchased at certain times. In addition, it also makes a big difference that we no longer manage our stock based on a manual min/max stock strategy but a data driven strategy with built in automation. Now, we purchase based on supplier delivery times and demand.”

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Stock level dropped

Through the collaboration with Optiply, Ledstores improved their stock management. Most notably, the total stock level has been brought down with 17%. This decrease mainly applies to the less impactful B and C category, which were brought down with 28% and 30%. By contrast, the important A category went up with 7%, which resulted in fewer lost-sales (24% less) and revenue growth (up 36%).

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What results does Ledstores see by using Optiply?

“When I look at my work as an operational purchaser, I have reduced the time it takes to place a purchase order from over an hour to fifteen minutes. Many of the purchasing tasks no longer have to be done manually. This time saving is enormous and I use it to expand the range, find new suppliers and test sample products.”

Ledstores used the ABC analysis, with which Optiply categorises the stock, to ensure product availability. Nicolas: “Since we have been working together with Optiply backorders and lost sales have decreased significantly. Especially for products in the A and B category. These articles have the most impact on our margin and revenue and we are, therefore, keeping a close eye on them.”

3 results of thecollaboration withOptiply

1. Insight into seasonal demand
2. Fewer backorders and lost sales
3. Automated replenishment orders