Flowlity positions itself as trusted third party for inventory management

In October 2020, French start-up Flowlity was named winner of the European Supply Chain Start-up Pitch organized by Supply Chain Media. Some people may have been surprised that the contest was won by a provider of inventory management software. Is that really so innovative in this day and age? In the first instalment of ‘Webinar Wednesday’ earlier this week, Jean-Baptiste Clouard, CEO of Flowlity, explained why his company deserved the prize.

Flowlity’s algorithms are unique, but the most important innovation actually concerns how the start-up is positioning itself in the supply chain: as a trusted third party between customer and supplier. Flowlity uses data from the customer and the supplier to calculate the optimal inventory levels for both parties. Additionally, the customer receives a tailor-made recommendation of what to order and the supplier obtains an accurate forecast of what the customer is likely to order.

Jean-Baptiste Clouard (pictured), CEO of Flowlity who co-founded the company two years ago, explained: “People have been talking about supply chain visibility for decades. It is based on the idea that if customers and suppliers share their data with each other, everyone can operate more efficiently. But little comes of it in reality. Most organizations are reluctant to share their data with supply chain partners. No supplier wants to give a customer full access to its order book. That realization is what led us to set up Flowlity.”

Vendor-managed inventory

Clouard referred to various methods that have been introduced to synchronize supply chains over the years, such as vendor-managed inventory (VMI) which shifts all the risks onto the supplier. “VMI achieves great service levels, but it’s not a great method for reducing the working capital requirement in the supply chain,” argued Clouard.

In collaborative planning, forecasting & replenishment (CPFR) the customer and supplier hold a weekly meeting to agree when the customer’s inventory should be replenished. “It’s a complex method that is still used, but it is time-consuming, not scalable and requires partners to share sensitive data with each other,” he continued. “Besides that, there is a lot of talk about demand-driven material requirements planning (DDMRP). That method solves many of the problems of a traditional MRP approach, but does not address the fact that many supply chains still have a silo structure. It remains difficult for customers and suppliers to reach agreement on inventory levels and replenishment orders.”

32% more stock

An MIT study of companies with annual revenue of over ten billion dollars underlines the scale of the problem caused by the lack of supply chain synchronization. By aligning the activities between supply chain partners, the companies could reduce their costs by 3-8% while also increasing their turnover by 1-4%, so the impact on profit is clearly sizable. “Every year, nearly two trillion dollars go to waste in the global retail sector because of too much or too little inventory in supply chains. That’s equivalent to the size of the entire French economy,” Clouard stated. “And things aren’t getting any better. Over the past 15 years, companies have increased their number of days’ worth of inventory by 32% to protect themselves against the increased unpredictability in their supply chains. That unpredictability has a major impact on the bottom line. According to McKinsey, supply chain disruptions cost companies up to 42% of gross profit.”

Creating trust

One of Flowlity’s customers is Saint-Gobain, which among other things produces windscreens for the automotive industry. The company sources raw materials from various suppliers in Europe and the USA. “At Saint-Gobain they wanted to reduce their stock and improve their service levels simultaneously. Suppliers regularly had to ship goods as air freight to be able to deliver on time. The objectives have been met. Thanks to our solution, Saint-Gobain was able to reduce its stock levels by 40%.”

Clouard is keenly aware that Flowlity will not immediately be accepted as a trusted third party by everyone, which is why the start-up’s market approach is aimed at creating trust. “Initially, we are targeting the customers. We want to provide them with the best solution for inventory optimization, powered by artificial intelligence. Once our solution is in place, we give that company’s suppliers free access to a forecast that predicts how much the customer will order. Once those suppliers have become convinced that our forecasts are the best, that’s when we can ask them for the data that will allow us to further improve the supply chain synchronization.”