A Major International Company servicing the FMCG Industry
The major issue was excessive inventory holding creating pressure on the business to achieve budget targets in highly competitive sector. The customer’s planning methodology was disjointed leading to the key contributors in sales/marketing operating separately with no centralised process of forecasting planning and allocation of stock. As a result, Customer Service was ranked poorly with major customers demanding allocation of key selling items affecting the supply of goods to the second tier suppliers, which resulted in significant customer complaints
We investigated processes used to manage inventory and identified service and performance issues and causes. We sought the buy-in of the stakeholders to identify pressure points and opportunities, developed a clear and concise gap analysis. Identified that the On Demand inventory system linked to the customer’s ERP would deliver the key parameters of inventory visibility along the supply chain allowing for sales, marketing, production, planning, expediting and consolidation at origin on one platform. Also with the added feature of virtual inventory allocation to ensure compliance with forecast and promotional stock release.
We needed two major pieces of customer information; one being Sales Analysis by SKU by Customer, the other being the Sales/Marketing forecast. This combined information allowed us to link demand to inventory creating a clear view of forward requirements by SKU, by customer, by sales type (replenishment, indent orders, catalogue, promotional, new stock fill, and standard reorders).
The platform allowed us to achieve outstanding results in a short period of time. This was evident by a sustainable reduction in inventory from $26.2 to $10.2m. All this was achieved during a period where sales increased by 15 %. Also, the ability to manage customer forecast to lock this using a virtual allocation feature of the system increased customer order and delivery fulfillment from 60% to 95%.
The unintended circumstances were that due to the significant reduction in inventory, the warehousing footprint was reduced by 50%, delivering a significant cost benefit to the business. The combined reduction of inventory and warehousing costs led to an outstanding financial result for the business.