FMCG SUPPLIER – INVENTORY REDUCTION
An end to end engineering, projects and manufacturing company based in the Netherlands supplying food production and packaging equipment globally.
In Q3 2008, the management team set a target of achieving a significant reduction in the working capital position of the business.
The primary driver for this was the release of cash from working capital for investment in areas of the business that would position it for when the economic and financial crisis was over.
The jumping off point for the effort was November 2008 and at that time the global inventory position within the business was €72M, equating to an Inventory Turn Ratio (ITR) of approx 5.3.
Significant organisational alignment was required in order to establish the strategy, introduce the focus on inventory by creating multi-site teams, and crucially the redesign of customer support strategy
In parallel to this, there was a defined analysis phase which entailed data mining and analysis of production and consumer demand. This allowed us to establish optimised stock levels, and make updates to site ERP systems with new demand planning parameters. A key part of the success was the design and implementation of a dynamic report suite for day to day operational management
Once through the analysis and set up phases, we were able to use the report suite to CHECK that the required actions were being taken, and continually closing the loop on actions v. results. Some of the actions varied per site, but include things like
- Systematic review of all Po’s
- Postponement of all non-urgent material
- Negotiation of part shipment
- Daily monitoring of planning activities to ensure JIT purchase planning
Operating swiftly and across 5 separate manufacturing sites, we were able to implement immediate controls to quickly effect the inflow of material into the business. After setting ambitious and aggressive targets, we then implemented a rigorous execution and governance process that drove the right activity and K.P.Is
Within 3 months, Inventory reduced by 24%, taking it from €72m down to €55m. Taking immediate action, along with aggressive and ambitious target setting were key to this success.
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