Industrial manufacturing inventory optimization

This major industrial manufacturing company asked nVentic to help them with inventory optimization. Their inventories increased and decreased over time depending on senior management focus and pressure. To get past this, the client wanted a sustainable solution to keep inventories balanced.

Approach

nVentic mapped the internal supply chain flows and helped the client extract the relevant reports from their system. We then transformed and analysed the data and identified an initial improvement potential of more than 25% net. This took account of some SKU’s where a shortage of stock was identified. nVentic categorized parts based on value/volume and variability. We also graphed historical stock evolution by SKU. Using nVentic’s proprietary tools this took just a day, from receiving the data to producing the report.

Client project teams were set up to agree the approach and lead workstreams. A baseline was set and a tracking mechanism defined. Quick wins delivered a 10% reduction of excess stock in only 3 months.

For the initial phase, top-running SKU’s were targeted. Improvements in key data quality were implemented. Improvements were also embedded in the underlying processes. Weekly tracking of KPI’s and stock position by SKU were set up to enable an ongoing focus and transparency. Production and storage strategies were reviewed for all parts.

Inventory optimization is always useful for industrial manufacturing companies. Having achieved the first-year target of a 25% reduction in inventory, a target of a further 20% was set for the following year, and further projects scoped out to deliver it.

Results

Inventory was reduced by more than 50% from the initial baseline over a period of 3 years, while service levels were maintained or improved. Improvements in the underlying data led to a better understanding of how and why to act – inventory optimization capability was significantly developed within the client’s teams.

There is still strong potential to take out more than an additional 20%, as well as to widen the scope. nVentic continues to support this client.