Redesigned Supply Chain Process Dramatically Improves KPI’s:
Industry: Consumer Packaged Goods (small/medium size business)
Problem: Finish goods inventory growth outpacing sales growth, diminishing margins and restricting cash flow/profitability.
Mission: Establish control over an increasing inventory asset and a decreasing customer order fulfillment performance. Reduce the amount of cash tied up in product inventory.
- 50% reduction in product inventory within first year ($34M to $17M)
- Saving for logistic cost of $4M/year (inventory carry cost)
- Saving for transportation costs of $1M/year
- Purchase costs savings of 10% where contracts were executed
- Improved order fulfillment/reduced backorders
Actions: Led/directed operating staff managers in the analysis of business processes, problem solving, prioritization and implementation of solutions aligned with the self-developed strategy for a customer requirement driven supply network. Highlight of actions taken are:
- Revised warehouse management procedures to establish control over the inventory network and the timely reporting of inventory records.
- Revised procurement procedures to establish control over PO’s and the timely issue and reporting of purchasing records.
- Revised customer order management to make incoming orders immediately visible to product planners for the “available-to-promise” process.
- Developed and executed a strategic sourcing strategy with these features:
- Reduce the supply base (domestic suppliers)
- Increase supplier involvement (partnership):
- Supplier owned inventory (eliminate consigned inventory)
- Lead time reduction
- Requirements planning (communicate customer demand)
- Direct ship bulk
- Introduced “requirements contracts”
- Introduced target pricing
- Introduced global contracts for common raw materials
- Developed and implemented improved forecasting process:
- One plan concept
- Link sales, R&D, operations and finance
- Installed forecasting and requirements planning systems
- Developed and staffed an Inventory Management function
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