Case Studies

Fixing shortages and excesses at the same time

nVentic helped an industrial manufacturer reduce shortages and excesses at the same time. We identified a 45% reduction in inventories while improving service levels from 85% to 99%.

Context

Our client was an industrial manufacturing firm with a high number of SKU’s. They had problematic data quality, and a desire to improve fill rates as well as reduce working capital.

A major challenge facing the client were capacity constraints – often inventory was moved between locations purely for want of space. This added superfluous stock movements to the data (not to mention logistics and handling costs).

Approach

nVentic evaluated the client’s 7 principal sites, working with a small central team in the first instance. Efforts needed to be put into data preparation, because of a number of challenges, especially a fragmented and incomplete material master.

First sight of the data also highlighted an unusual problem – multiple items were showing negative stock levels! We decided not to correct the negative stocks to maintain data integrity and highlight the scale of the problem. We also set target service levels at 99% to help the client identify opportunities to reduce shortages as well as excesses.

Early on, nVentic recommended process improvements that would be beneficial in their own right, as well as improving data quality. The negative stock issue was caused by gaps in the booking process. We also recommended a rationalisation in the number of SKU’s. The client was already aware of the issues around capacity constraints and wasteful stock movements. They needed help to free up space while improving fill rates and this is where nVentic’s Inventory Evaluation was invaluable.

Results

Despite the challenges, we identified an overall reduction potential of 45%. Using nVentic’s clear and simple to follow evaluation, the client decided to set a target for the first 3 months of 25% and to focus on the 500 SKU’s with the greatest improvement potential. Given the quality of the underlying data, checks were done on all key parameters (such as lead time) for each SKU before implementing changes. Planners then bridged the gap between our recommended levels and existing levels stepwise, so that they could further minimize risks caused by data inaccuracy.

The client targeted the SKU’s with the greatest risk of shortage and built up enough stocks to improve service levels. The outputs of our evaluation provided the full planning team with a 6 month action plan. It was immediately apparent that during that time a major improvement in inventory levels could be realised. Refreshes of nVentic’s Inventory Evaluation every 6 to 12 months allowed benefits to be sustained.