Working Capital, Cost, Capacity & Customer Service Analysis, Planning Process Review

Client: Confectionary Products Manufacturer

Background

Inventory and service level analysis of our client showed an opportunity to reduce inventories at current service levels or achieve service level targets with current inventory levels, requiring a different mix of inventory via an enhanced forecasting and planning process.

Challenge

A review was commissioned to determine what process and system enhancements were required.

• various demand profiles for each material type, including fund raising and seasonal profiles
• missing key management levers (service level, inventory investment and cost)
• many 'broken links' in processes
• systems need to be enhanced to establish links, provide management levers and enable exception based workflow

Approach

• better match forecasting techniques to product demand patterns to improve service levels and reduce inventories
• link and synchronise demand and supply planning processes to provide management controls and drive improved inventory, cost and service level results (roadmap with specific actions linked to benefits)
• revised ABC classifications, manufacturing set-up costs
• optimise inventory holdings for each item in each location to meet service level targets at the lowest cost
• operational coaching/mentoring to embed new processes and system capability up-skill the planning team improve system usage
• improve planning data

Outcome

Immediate opportunities:

• investment reduction by up to $5.3m in line with a reduction in service level goals to current levels of achievement (93.2%) off the shelf without expedite activity
• in addition a further reduction of up to $1.4m leveraged by further reviewing manufacturing constraints

Further opportunities exist to:

• maintain the current level of inventory investment ($30.2m) whilst achieving the desired service level goals (A=97.5%, B=96%, C=93%) off the shelf without expedite activity, by operating under current production quantity constraints and forecasting techniques and leverage up to a further $1.2m saving by reviewing manufacturing constraints
• leverage a potential $10m reduction in order quantities and safety stocks whilst achieving the desired service level goals changing systems, forecasting techniques and processes