Toy House is a national toy retail leader in Eastern Europe, tracing its origins back to 1992 when the company started selling toys in a kiosk. Today, it operates 67 stores and an online store, spread across 18 major cities, offering an average of 50,000 unique SKUs.
In its quest to modernize its inventory management system, Toy House partnered with LEAFIO AI to integrate automated retail demand forecasting software into its business processes. The primary goal was to free up capital for further growth through better stock management, increased forecasting accuracy, process efficiency optimization, and automated order generation.
The challenge: how to keep the leading positions among retail companies?
People, of course, are the key, the same as in every business. But without automation and defined business processes, it would be impossible to stay efficient in this highly volatile market. Working in a fast-paced environment, a business must keep its eyes wide open to stay competitive. That's why Toy House's management decided to automate as much as they could, including the registers, online store, and warehouse operations. They were particularly focused on efficient inventory management. One of the stages was the optimization of the stock with the following objectives:
- Identify and eliminate overstocks;
- Optimize purchasing process;
- Automate forecasting and order placement;
- Create a process for the new item introduction;
- Increase turnover, decrease OOS, and lost sales.
«Numerous retail locations that carry a high volume of products cost us a fortune. That’s why we partnered up with LEAFIO and implemented their Inventory Optimization software. We've been using this software for about four years now, and we're delighted with the results», — said Vlad, Toy House co-founder.
The inventory management department needed streamlining too. Each manager used to handle 5-7 stores on average. It was actually all managed in Microsoft Excel as the team had to maintain order schedules, form orders to the suppliers and warehouses, and manage internal distribution. It was a very labor-intensive process, and specialists were often short on resources. The business has distinct seasonal trends as the demand, sales, and assortment explode during the New Year holidays. But the number of lines in Excel has a limit. So a new tool was needed.
Process of implementation
Having correct and scalable processes in place gives many business opportunities. The software is not a miracle, and it will not start printing money just because I pressed the button. The project works only if the vendors and team of retailers work as a whole: dive into current processes, implement the methodology of the solution, configure the algorithms. It is critical to have a positive holistic outcome in such a project because everyone is a winner in the supply chain only if the customer buys the product sourced from the supplier.
The vendor's implementation team took the time to understand the business processes, enhance, optimize and automate them. They took care from the very beginning until the implementation was completed. Toy House adopted a "pull" inventory management strategy—a model responsive to customer demand. This strategy included the establishment of a functional Distribution Centre (DC) that became the central regulator of the entire supply chain, serving as the point of contact and transfer for all orders and inventory deliveries between online and offline sales locations. Aiming for supply chain optimization, Toy House integrated AI-powered retail demand forecasting software to ensure demand forecasting accuracy and inventory level adjustments in a volatile market environment.
After that, the LEAFIO AI customer success team took over, and it has continued to support Toy House for four years now. LEAFIO AI continuously enhances its product with new features. They listen to feedback from retailers, help with configurations, set up new reports that have direct business value and are always on top of things with new releases and onboarding.
«Well, honestly, I have no idea how they manage their sleep since they are on the call 24/7. The guys are very involved in the process. Initially, they did an extensive discovery phase before the project began», — Vlad.
The results of optimizing inventory management
Originally, Toy House has defined business goals. Just because inventories are the single biggest investment and availability at the stores is critical, we have prioritized them as follows:
- Improve Service Level
- Improve product turns
- Get rid of overstock
All of the goals have been reached, and the company continues to improve its performance in every way. The project brought such results as:
- Full order generation automation;
- Structured order schedule;
- Transparency of order placement;
- Supplier Reliability Assessment and reporting;
- Assortment management and optimization;
- Analogs management;
- Seasonal demand fluctuation management;
- Robust analytics and reporting throughout the entire supply chain.
Toy House has significantly enhanced its inventory management by integrating LEAFIO AI's demand forecasting software, which uses machine learning and predictive analytics to dynamically manage safety stock levels. This system automatically calculates and adjusts the necessary safety stock for all locations in real time based on current demand, order frequency, and market trends. Additionally, the software ensures optimal shelf displays by maintaining a balance of safety buffer, promotional goods, and emergency stock, leading to higher customer satisfaction. Customizable reports provide instant insights for strategic decision-making, while advanced algorithms manage excess and promotional inventory, optimizing the supply chain and minimizing disruptions.
With warehouse, distribution center, and delivery and store supply operations synchronized through an intelligent inventory management tool, the company managed to keep its delivery costs low, its customers satisfied, and its staff productive.
For instance, we have significantly reduced overstocks and improved availability on the shelves. Of course, our customers have noticed the change, and we know it. We are now able to keep the promises we give to our customers, and they can always find the products we declare. I think that this would not be possible without the backbone - efficient automated processes of sales forecasting, promotion management, seasonality, and keeping the service levels.
Results in figures:
- 10% LFL sales increase
- 98% SKU availability
- 26% lost sales decrease
- 19% overstock reduction
As you can see, Toy House reduced its excess inventory level thanks to AI-powered demand planning software by LEAFIO AI. Due to highly accurate demand forecasts, it dramatically increased its inventory turnover rate, thereby reducing logistics and delivery costs. Between 2018 and 2019, the company increased its rate of automatically re-ordered goods from 72.1% to 96.2%. This entire process of retail demand planning is now managed by just two people, thanks to effective demand planning software.
Our supply chain has become a solid foundation for our marketing and online retail to ensure steady revenue for the business. To conclude - it is very important to choose the right automation partner since the entire project can either make you or break you. — said Serg Zverjaka.
