How Did a Private-Equity Owned Medical Supplies Manufacturer Succeed at Reducing Inventory and Increasing its Service Levels?
A private-equity owned $100M+ medical supplies manufacturer was struggling to maintain both inventory and customer service levels. We implemented an inventory management solution to change that.
The right inventory optimization structure and systems led to improved service levels – and a 20% financial impact.
Upon discovery, our client was facing three different-but-related challenges:
- Poor Service Levels: Excessive backorders and short shipments were putting pressure on their value proposition while incurring unnecessary freight expenses on rush orders and split shipments.
- High Inventory Levels: Inventory levels were growing at a faster pace than sales (including slow moving & obsolete inventory); creating very low inventory turns.
- Cross-Functional Communication: There was a limited alignment between Operations & Sales, resulting in high levels of inventory, including items without demand.
We leveraged several solutions during this client engagement, including Inventory Management, Raw Material Replenishment Model, Process Improvement Measurement, and Custom Tools with Comprehensive Inventory Dashboards.
- Bleed Down Excess FG & RM Inventory: We developed an online inventory depletion tool, which Sales Reps & Supply Chain team members leveraged to identify, plan, track & execute the sales and disposition of non-productive inventory.
- Manage Expiring, Expired, and Quarantine Inventory: We assisted QA on decision tree (leveraging an online tool) & aging analysis to deplete expired/expiring inventory (rework options, scrap) and re-evaluate quarantine inventory levels.
- Implement Global Raw Material Replenishment Model: We designed, developed and implemented a sophisticated global RM replenishment model tying customer demand directly to RM procurement and management.
- Implement Global Inventory Dashboards: We transitioned from a limited site view to a global overview, providing visibility to the entire Supply Chain. We also created RM / FG DOS & Demand Planning Reports to track compliance & eliminate excess inventory purchasing.
- 20% Financial Impact: The inventory decreased while the service levels improved, and the inventory turns increased. This solution also generated cash to invest back into the business.
- Organizational Focus: We established a cadence of action-oriented SIOP (Sales, Inventory, Operations Planning) meetings and built a custom inventory-depletion tool to assist with excess finished goods, raw materials, and expiry/quarantine materials.