Our performance improvement team helped one manufacturer improve working capital, reduce excess inventory, and boost customer service.
Company
A leading global manufacturer in the motor and generator sector wanted to improve its performance and customer service.
Challenge
The company faced increasing inventory and decreasing delivery performance due to inadequate forecasting, weak stocking strategies, inaccurate or missing enterprise resource planning (ERP) inventory parameters, prohibitive minimum order quantity requirements from suppliers, and customer mismanagement.
Support
The Crowe performance improvement team conducted an on-site, hands-on, four-week assessment to identify problems and propose value-creation activities.
Solution
The assessment led to an implementation over multiple months focused on reducing overall excess and unhealthy inventory through four targeted focus areas. The results included millions of dollars of cash flow impact and working capital improvement as well as significant improvement in inventory turnover and on-time delivery to customers.
Challenge details
The company experienced rising inventory levels in conjunction with underperforming, late deliveries to nearly all customers. Too much focus on small, low-impact customers prevented the company from delivering higher service levels to more critical customers.
Our team identified four main reasons for the significant excess of on-hand inventory:
- Inadequate forecasting and sales, inventory, and operations planning (SIOP) processes
- Poorly defined and managed stocking strategies
- Insufficient management of procurement parameters
- No guidelines for effective product life cycle management
Solution snapshot
Our team targeted four areas for improvement and deployed a variety of solutions.
Stocking strategies
- Aligned customer order lead-times and delivery commitments with an organizational stocking strategy
- Refined policies and procedures for customer cancellations and deferments to minimize operational disruptions
- Enhanced SKU-specific safety stock and Kanban levels based on financial relevance and operational complexity
Raw material sourcing strategy and parameters
- Optimized and reduced minimum order quantity burdens on purchased materials
- Negotiated improved raw material lead times to lessen overall forecast reliance
Disposition workshops
- Led cross-functional workshops to dispose of excess and obsolete inventory while maximizing realized value
- Enacted immediate measures and product owner reviews to cancel and postpone raw material receipts, as appropriate
- Developed a framework and trained internal stakeholders to conduct ongoing, routine disposition activities
Forecast accuracy
- Refined and emphasized historical performance reviews and sales team accountability requirements
- Adjusted forecast deletion and demand aggregation windows by product family to maximize efficiencies while minimizing inventory
The results
Working with the Crowe team, the company was able to:
- Support on-time customer fulfillment through updated stocking strategies
- Improve the raw material sourcing strategy and parameters
- Mitigate excess on-hand materials through disposition workshops
- Upgrade forecast accuracy, SIOP, and site-level demand-planning influences
- Enhance inventory performance
- Increase visibility into key metrics with real-time dashboards, integrated into its ERP systems
- Significantly improve customer service levels
- Capture additional topline revenue
- Maintain positive change through training and tools
Takeaways
- Our team is committed to helping our client maintain positive changes. We trained internal teams on the tools and processes we implemented and designed a weekly accountability framework to support further positive actions.
- Customer service is a vital fundamental for any business. Our team’s improvements helped the client prevent stock-outs and other inventory issues, which increased customer satisfaction and retention.
- Especially in a higher interest rate environment, maintaining working capital is paramount. Because inventory optimization is one of the legs of working capital, our client was able to maximize this important area of opportunity.
- Uncertain economic environments, such as shifting tariffs, can have an adverse effect on supply chains, so optimizing inventory levels to balance quantities and price is important.
Transformative initiatives in performance improvement
See how our team can help you maximize the profitability and performance of your business.
Contact us
Our team offers performance improvement expertise and works across a variety of industries, end markets, and business maturity levels. Contact us to see how we can help your business maximize value.
