Auto Transmission Maker, Sonnax, Shifts to Better Forecasting and Fewer Backorders with SmartForecasts

Sonnax Industries, Inc. of Bellows Falls, VT designs, produces, and supplies automotive transmission components for the very competitive automotive aftermarket. Founded in 1978, Sonnax has become a major player in its market. The company has been growing by adding more and more product offerings each year. With approximately 200 employees, the company produces more than 1000 products that its sells directly to transmission shops and distributors throughout North America. About fifty percent of its products have intermittent, slow-moving demand and are considered hard to forecast.

The Challenge
“When we started forecasting, we just guessed about what we needed,” says Jeff Loewer, vice president of planning and information technology at Sonnax. Since Sonnax has a large number of items to forecast, forecasting was very time consuming, and not every item was forecasted on a regular basis. Even when Sonnax started using spreadsheets to help them, the process was still very laborious and relied primarily on judgmentally-based estimates.

Sonnax needed a way to generate required forecasts faster and to quickly evaluate what was happening in its business. “Our planning people need forecast numbers all the time, and we have to be prepared to supply them,” said Loewer. “Since lead time demand forecasts are an important input required by our ERP system, our inability in the past to provide accurate and timely lead time requirements resulted in backorders on many of our most popular products.”

Sonnax also needed better analysis to understand the trends in its business. The company serves large and small customers. Infrequent, unpredictable orders from Sonnax’s larger customers would often cause spikes in demand that strained manufacturing resources and made planning for the cyclical ups and downs in the business more difficult. Management wanted to change the time-intensive, legacy forecasting process into one that was more efficient and could provide better inventory and production planning information.

In 2002, Sonnax started to look for a better demand forecasting and planning solution. Because it already knew that intermittently demanded items presented an especially challenging inventory management problem, the Sonnax evaluation team made the ability to accurately forecast intermittent demand a key requirement for any potential solution.

The Solution
After evaluating several competitors, Sonnax chose SmartForecasts Enterprise because of its unique intermittent demand forecasting capability and rich feature set. Sonnax’s management recognized that SmartForecasts’ many features and capabilities would provide their company with plenty of room to grow.

At the same time, Sonnax also installed the X3 ERP system from Adonix Software, and integrated SmartForecasts directly with it. SmartForecasts added functionality to the Adonix X3 system, providing advanced capabilities to improve Sonnax’s demand forecasting process. It has also helped to streamline that process by directly accessing demand history stored on the Adonix system and automatically creating forecast results. SmartForecasts then transfers these results back to the ERP system for use in a variety of inventory planning, production scheduling and distribution requirements planning activities.

Before the implementation of SmartForecasts, Sonnax was only able to manage high volume “A-level” products that represented just 20 percent of its inventory. These items were forecasted using sales force estimates only. There were no forecasts created for the rest of the product items.

With SmartForecasts, Sonnax has been able to make better use of input from its sales force and manage the seasonal peaks and valleys in demand. The company has instituted a new two-tiered forecasting process using a baseline statistical forecast produced by SmartForecasts together with input from the sales force. Using this process, Sonnax first creates a statistically-based demand forecast for its largest customers, and then adjusts the results with input from the sales force to incorporate known future orders. In this way, they are able to plan for anticipated future spikes in business. For the rest of its products used by other customers, Sonnax forecasts demand on a purely statistical basis and then combines the two sets of forecast results. Using SmartForecasts’ intermittent demand forecasting capability, the company can ensure that even its “C-level” products, which are only sold infrequently, are also forecasted regularly and their stocking levels, set accurately.

The Results
Sonnax is currently using SmartForecasts to produce significantly improved demand planning numbers and as a result, is seeing very positive developments in their inventory and production planning activities. Furthermore, the software has helped the company make the entire planning process more efficient. “We are able to do more forecasts with less work,” according to Jeff Loewer. “SmartForecasts has the strong analytical capabilities we need to better understand our business.”

In fact, Sonnax now forecasts all of its products on a regular basis, not just the high-volume, A-level items. While the company still has a backorder problem, it’s continually getting better. As Loewer states, “We don’t have as many backorders on the ‘A-level’ items we regularly need. As we make better use of SmartForecasts’ intermittent demand capabilities, we expect to achieve better service for our ‘C level’ products too.”

In the automotive aftermarket, having the right product in stock when a customer calls can make the difference between keeping or losing customers and being successful or not in the face of stiff competition. For Sonnax, SmartForecasts is helping to achieve high levels of customer satisfaction while maximizing profits through more efficient production and inventory planning.

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