nVentic helped an industrial manufacturer identify a 45% reduction in inventories while improving service levels from 85% to 99%.
Our client was an industrial manufacturing firm with a high number of SKU’s, 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, and this added superfluous stock movements to the data (not to mention logistics and handling costs).
nVentic evaluated the client’s 7 principal sites, working with a small central team in the first instance. Some efforts needed to be put into data preparation, on account of a number of challenges, especially a fragmented and in places incomplete material master.
First sight of the data also highlighted an unusual problem – multiple items were showing negative stock levels! While running our evaluation, we decided not to correct the negative stocks so that we could 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 in the evaluation, nVentic could recommend a number of process improvements that would be beneficial in their own right, as well as improving future 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 but needed help to free up space while improving fill rates and this is where nVentic’s Inventory Evaluation was invaluable.
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 also 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, and 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.
Our client was a major OEM manufacturer in the automotive industry. Globally, the company demonstrated average performance when benchmarked with its peers for DIO, but nVentic was invited to look at their flagship site, where they believed performance to be best in class. Having already been through several projects to improve inventory management, the client still struggled with inventory performance visibility and asked nVentic to run a proof of concept project.
nVentic immediately understood why inventory visibility was poor. The 6 million transactions per year were deleted from the ERP systems and warehoused on a frequent basis. We therefore had to deal with multiple instances of missing or conflicting data right from the start. Rather than wait until all data was available, we focused on what was immediately to hand (less than a year) and carried out our standard Inventory Evaluation on that basis.
Despite the client’s expectation that we would find little or no improvement potential, nVentic identified an overall opportunity to reduce inventory by 15%, with around 5% in finished goods and 20% in raw materials. The client commented that the transparency we gave them in a week was something they had strived but failed to achieve for many years. We also made some key recommendations in master data management.
Would you like to talk to one of our experts? Contact us
nVentic mapped the internal supply chain flows for the largest manufacturing site and helped the client to extract the relevant reports from their ERP system. We then transformed and analysed the data and identified an initial improvement potential of more than 25% net, taking account of some SKU’s where a shortage of stock was identified. We categorized parts based on value/volume and variability. We also graphed historical stock evolution by SKU. Using nVentic’s proprietary tools we were able to carry out this analysis in a day, from receiving the ERP 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.
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.
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 management 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.
nVentic helped an industrial manufacturing client sustain substantial 2019 gains in inventory optimization through the 2020 pandemic.
Ways of working were put in place to deliver sustainable performance and continuous improvement in inventory management.
Towards the end of 2019, a further net reduction potential of 15% was identified and action plans put together.
Early in 2020, however, the global pandemic created additional supply chain challenges:
nVentic’s analytics and consulting support helped the client to take appropriate mitigation actions without losing focus on the longer-term improvements in inventory management. Key to achieving this was balancing objectives and careful data analysis to reach the best balance:
Each site was responsible for identifying and implementing actions to achieve the targets.
Programme management was coordinated centrally, with standardised reporting. nVentic supported global steering and provided analytics, as well as supporting manufacturing sites facing particular challenges.
One of the primary challenges, especially in the early phase of the pandemic, was in establishing and maintaining transparency.
A number of supply issues were combined with a slowing in demand and it was essential to understand and prioritise the risks so that additional stock could be built where needed without losing pressure and focus on the underlying improvements planned.
nVentic carried out a number of analyses, applying statistical techniques to business data in order to provide rapid insight and focus. nVentic also worked with local teams to enable them to understand and take full advantage of the data insights provided.
While the early part of the year, especially the second quarter, was primarily concerned with preserving supply chain resilience, by mid-year the situation was clear and improvements were driven through in the second half of the year.
Compared to the initial target of 15% net reduction, 12% was delivered, with the 3% delta caused by the additional stock deliberately built to offset Coronavirus risks.
Service levels continued at their baseline high levels and no more sales were lost through lack of inventory than prior to the programme beginning in 2019. Further reductions have been planned for 2021.
Would you like to talk to one of our experts? Contact us
Our client was a global manufacturing firm with a broad range of products, both make to order and make to stock. The company was engaged on a drive to reduce inventories in order to free up working capital, but did not want to sacrifice growth or customer service.
nVentic carried out inventory evaluations to quantify and target reductions while slightly improving service levels. The baseline service level % was in the high 90s. However, there were two major externalities to manage:
A high percentage of raw materials came from Asia and average lead times were 3 months.
nVentic’s analytics and consulting support helped the client to right size inventories in the face of significant uncertainty. Key to achieving this was ongoing sensing of demand:
At the heart of the modelling was predictive analytics. The first stage of this was done using a number of standard reports from SAP:
nVentic created a report to predict stock levels for the coming 6 months. This predictive report was given to planning teams weekly, allowing them to layer on known externalities (i.e. all information not within SAP).
The granularity and flexibility of the data reports made it very easy for planners to foresee shortages and overstock positions, and so update plans and orders.
nVentic helped our client segment the data to target additional safety stocks only for those suppliers who genuinely represented additional risk. This alone allowed safety stocks to be greatly reduced.
Specific mitigation plans were put in place to deal with the actual supply disruption, including strategic building of inventories for some items and the sourcing of alternative suppliers.
A good deal of attention was also put on cycle stock. At the start of the project, a lot of planning was done manually and orders placed with set cadences – monthly or weekly – based primarily on planners’ bandwidth. nVentic’s analysis allowed the client to see how much benefit could come from shortening order cycles for certain items. This better smoothed demand to suppliers and helped reduce upstream variability, as well as reducing cycle stocks.
Perhaps the biggest impact was achieved by giving planners forward visibility of predicted stock levels. All of the data they required was in SAP, but previously they did not have the means to extract it and manipulate it in a timely manner.
In addition, new techniques were introduced to the planners. There had previously been an excessive reliance on a small number of MRP types in SAP. nVentic helped the planners to understand where to apply different MRP types. This facilitated greater automation for some items, giving planners more time to deal with the more difficult items.
Using the predictive analytics, the client delivered a 20% decrease in inventories in one year, while improving fill rates. Furthermore, much greater transparency was created, with planners having a much better idea what future inventory levels were likely to be. At the end of the year a further 15% improvement was identified by the planning team itself for the following year.
Would you like to talk to one of our experts? Contact us
Our manufacturing client had a particular challenge with sporadic demand for a high number of items.
nVentic were asked to analyse the demand for these items and to identify an approach to manage them that would deliver an improvement in performance and also be pragmatic – compatible with existing technology and with clear criteria for planners to follow.
3 approaches were considered:
Approach 3 was tested using 6 different statistical approaches.
A range of other levers were also considered, including reducing lead times, reducing minimum order quantities, reducing batch sizes, increasing review frequency, shaping usage, varying service levels, and updating policies.
A dozen criteria were identified to segment items appropriately.
nVentic identified for the client which items should follow each of the 3 approaches, and then, through testing, identified appropriate statistical distributions to support the replenishment approach. An assumption of normal distribution underlies a lot of inventory management technology but this is particularly problematic with highly sporadic demand.
Our analysis found that two thirds of the sporadics considered would benefit from a different approach, which could be managed using their existing technology. The high service levels could be maintained while reducing inventory levels by 17% overall.
The remaining third had extremely sporadic demand (no demand at all for 9 consecutive months) and for these items alternative strategies, such as increasing customer lead times or finding alternative sources of supply, were the only realistic option.
We found that Forecast Value Added (FVA) was too low for most items to make plan to forecast a viable alternative. Replenishment was the best option for a significant percentage of items, but it was essential to factor the high variability and sporadicity into considerations of safety stock and re-order level. It is also essential to understand that the segmentation is not static and that the client needs to refresh the analysis regularly to take account of changes in demand.
Would you like to talk to one of our experts? Contact us