The idea of tank telemetry has been around the CPI for years, but ChemLogix, a software company based in Plymouth Meeting, Pa., has developed a slightly different concept of inventory management tools and tank material replenishment services. Whereas most supplier-managed inventory and tank telemetry programs originate on the supply side—many supplier reps offer it as a value added service—ChemLogix suggests that these services are better implemented from the buy side and made compatible with all suppliers' inventory replenishment services in line.

"Essentially, we're offering buyers an outsourced inventory management and tank replenishment system to handle all their needs," says Ed Dolan, vice president and general manager of ChemLogix.

According to Dolan, the supplier-managed inventory/tank telemetry concept originated as a way that marketing representatives could add value to customers' contracts while at the same time reducing their own delivery costs and streamlining the supply chain.

"Years ago, suppliers in the compressed and cryogenic gas market realized that a very high percentage of their total costs involved the distribution of product," says Dolan. "In order to control their costs, they found that they needed good information on stock levels in the tanks so they could make materials deliveries to multiple customers on the same day, reducing their numbers of deliveries," he says.

"With supplier-managed inventory, the supplier monitors levels of material in the tank and replenishes the inventory when levels fall to a predetermined point," says Dolan. "This way, buyers or plant workers don't have to manually measure their own inventory levels and decide when to order more material," he says. "The supplier's truck just shows up and tops off the tank."

Dolan says the traditional supplier-managed inventory and tank telemetry premise is flawed in that it doesn't take buyers' real needs into consideration. "Marketers must realize that purchasing professionals are comparing one suppliers' inventory replenishment system to those of other suppliers. The purchasing pro may have contracts with all of the suppliers, but they're looking for some continuity in the process," he says.

The ChemLogix system, as Dolan explains it, allows suppliers to manage inventory replenishment, because they are better suited to do it, but buyers keep overall responsibility for the process.

Here's how it works: ChemLogix meets with the buyer to explain the program's parameters and develop an implementation strategy. "Outsourcing an inventory replenishment process is generally a piece of a much larger puzzle and must be tailored to customers' existing and potential e-business and technology systems," says Dolan. "The direction we take in working with the customer depends upon the strategic initiatives in place, such as e-commerce platforms, enterprise resource planning (ERP) systems, and other inventory management procedures," he continues.

Next, ChemLogix installs telemetry monitors at the customer's tank farm. ChemLogix collects the inventory-level data from the sensors, validates it with a series of tests, and converts the data to measurements that the customer and its suppliers can both use. Then ChemLogix stores the data in its system. "We also post the data to a Web site along with tools so that our customer or their customers can read and use the data," explains Dolan. "We provide data series and graphs showing levels in the tanks over time and consumption rates."

The system offers several options for customers' suppliers to manage replenishment in accordance with their own systems. For example, a customer service group may be set up to await a purchase order and may be able to directly monitor stock levels in the tanks, see usage patterns over time, and order material when necessary. Or, data from the tanks may be fed directly into suppliers' ERP systems to automate the process.

All of the information contained in the ChemLogix system is encrypted and password secured so that suppliers have access to only the data corresponding to tanks they are contracted to supply, according to Dolan. " ChemLogix does not come between the buyer and supplier. Rather, we provide the tools that help bring the companies closer together," he says.

On average, the system takes about a month to set up from start to finish. And while the amount of cost savings it provides varies by customers and suppliers involved, Dolan says preliminary studies of the ChemLogix system indicate a total return on investment in 12-18 months.