Value Beyond Inventory Cost Savings
How RSI’s Technology and Expertise Helped One Client Achieve Value Beyond Inventory Savings
When a leading manufacturer of engineered surfaces connected with Right Sized Inventory (RSI), they expected to bring better balance to their inventory positions. After all, RSI creates value for our clients based on the combination of our patented inventory optimization technology, the expertise our supply chain team brings to the table with Inventory Optimization as a Service (IOaaS), and our speed of deployment.
Our team of supply chain professionals provide expert predictive analytics support to accompany our patented inventory optimization technology. IOaaS is our method for ensuring RSI clients achieve the best possible value from our unique predictive analytics system. Our team engages in everything from helping clients establish their initial data connections to providing regular analysis support for business processes to creating complex scenarios that help answer critical business questions.
Conservatively, RSI’s IOaaS team helped this client achieve inventory reduction savings of more than $10M. And while this is an impressive figure, what our client didn’t expect was the additional value they would realize beyond inventory cost reductions with RSI’s help.
Addressing Demand Volatility
Demand volatility is a common trait among project-based businesses. The RSI IOaaS team worked diligently with our client to filter out demand noise, enabling them to better understand their market dynamics. In addition, RSI suggested a shift from Make-to-Order (MTO) to Make-to-Stock (MTS) approach, which helped streamline operations. Previously, our client had been overstocking due to a system of counting sheets per day. RSI introduced a new approach that focused on the frequency of demand rather than sheer volume.
RSI also helped the client to use a three-month trend to gain better insight into near-term business trends. This data-driven method has allowed our client to anticipate demand fluctuations more accurately and respond proactively.
Improving Customer Service Levels
With over 20 distribution centers (DC), maintaining a high customer service level (CSL) is a priority for our client. RSI's IOaaS team helped our client to set more effective inventory policies. This gave them better control over inventory policy setting, leading to better inventory balance. In addition to overall inventory cost savings delivered through improved policies, every DC where RSI's methods were implemented saw a significant increase in CSL, with some reaching up to 98%.
The Economic Order Quantity Exercise
One of the major challenges this client faced was the near-equal minimum and maximum inventory limits, which led to a large number of orders. RSI introduced an Economic Order Quantity (EOQ) system with a spread in the Min/Max. For example, the EOQ for lower volume items became a month’s worth of demand. This led to improved efficiency and a reduced number of orders. The efficiency gained through this exercise allowed our client to cancel unnecessary truck orders and reduce overtime. Our client’s plants are no longer swamped by frequent, small orders that drive up changeover costs and reduce manufacturing inefficiencies. Our client’s goal is to stop working on Sundays, and with RSI's continued assistance, they are hopeful about achieving it.
Conclusion
In today's rapidly evolving business landscape, managing demand volatility and optimizing inventory can be a daunting challenge. However, with the right partner and tools, businesses can navigate these challenges successfully. RSI has proven to be that partner for this and many other clients, helping them transform their operations and achieve unprecedented results. As this client has discovered, the value RSI and our IOaaS team of experts provide often extends well beyond inventory cost savings.
