A major importer and distributor of computers, laptops, computer peripherals and consumables with nearly 500,000 sq ft of warehousing space. The client is primarily engaged with multiple product lines that are characterized by extremely short product life cycles. Hence, it was critical for the business to attain and maintain accurate demand forecasting capabilities to manage their inventory and supply chain.
Several product lines were over-stocked with aged products that were difficult to sell. This, combined with limits on capital resources, made it difficult to order sufficient newer products leading to stock-outs and below par service levels.
Lack of long-term and systematic agreements with corporate customers on minimum order sizes for delivery led to excessive distribution costs.
Lower than desired service levels combined with poor communications with customers were key factors behind deteriorating customer relationships and an inability to build a robust pipeline of steady long-term customers. Receivables days outstanding were also on the rise. This added to increasing inventory levels of products no longer in demand and increasing product write-downs due to redundancy. As a result, the financial health of the company was being negatively impacted due to cash flow restrains.
A new inventory management system and forecasting tool had been implemented but had failed to meet the desired objectives. Inventory levels had been rising and service levels were still dropping.
Staff were frustrated with the new tools and were resisting utilizing them properly which often meant they resorted to alternative methods to determine replenishment orders to improve customer relationships. This was not working.
A new market forecasting approach was developed and implemented.
A uniform and practical approach to determining replenishment order quantities was established. Old inventory was actively managed on a weekly basis and a dedicated team was made responsible for moving aged stock before its value dropped below cost.
Innovative approaches to clearing redundant inventory resulted in de-aging of inventory. This allowed product line managers to stock higher levels of current products within existing capital limits.
A new receivables management system was developed and implemented, proactively driving days outstanding down by over 24%.
Inventory KPIs were adjusted and new targets set that helped drive improved inventory performance.
Minimum order levels were set for same day delivery allowing consolidation of smaller orders reducing delivery costs by more than 11%.
