Manufacturing
Organization
Consumer products manufacturer
Need
Reduce inventory by $50 million
Outcome
Improved materials management and forecasting to reduce expensive inventory
Understanding the situation
A complex inventory management process and softening demand left this consumer products manufacturer with more than $50 million in dead stock, or inventory that simply wasn’t moving.
Several factors contributed to the high inventories:
- Market demand softened
- A price increase at the beginning of the calendar year
- A recent acquisition, multiple teams, and systems contributed to complexity
- The company’s data-modeling approach and lack of visualization failed to deliver accurate information
Furthermore, a six-week shutdown of the company’s Eastern European manufacturing facility made it impossible to receive key parts for high-demand products. Also, the company began noticing discrepancies between what was ordered from the European facility and what was delivered. A study revealed they had received millions of dollars in excess inventory that had high profitability but limited market demand.
Exploring the challenge
The company targeted a $50 million reduction in non-moving stock with a goal of returning inventories to pre-COVID levels averaging $10 million. Additional goals included improving data reporting, gaining better visibility on usage, and a more accurate forecast of market demand.
The CLA team collaborated onsite with the client and developed a data analytics strategy. New reports aligned demand and forecasts with inventory, purchase orders, and pending deliveries.
The team also developed an interactive product crosswalk tool based on bills of materials (BOM). This helped identify compatible parts so if one part was out of stock, several alternates could be identified. This avoided having to order even more inventory for each production run.
Achieving results
The CLA team created multiple Power Business Intelligence (BI) reports for a quantity versus value analysis to compare the average cost for inventory with the actual cost for receipts and shipments.
Inventory analysis reports included:
- Demand versus availability
- Expected versus actual receipts
- Past-due open purchase orders
- Sales backlog
- Unexpected purchase order receipts
- Confirmed plan versus receipts
For operations, CLA created a BOM report enabling users to select finished goods and view on-hand components for each step of production. With better visibility, forecasting was identified as a key improvement initiative.
Armed with accurate information, a major strategic outcome was the ability to drive conversations about mismatches between ordered versus promised products — with data. With visibility improved, the company was able to target millions of dollars of inventory reductions.
With visibility improved, the company was able to target millions of dollars of inventory reductions.
