Cosmetics Company to Manage Inventory

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Makes Supply Chains Lightning Fast

Supply Chain Management / Supply Chain Consulting

CASE STUDY Best Practices in Inventory Management

K. Ravichandran Debjyoti Paul

A leading consumer products company dealing in cosmetics and other personal care products was seeking ways to: Reduce inventory levels across their forward supply chain Improve Inventory Record Accuracy at their storage points Accurately track damaged goods at various points in the supply chain The above problems together were a significant burden to the company. Implementation of best practices after a detailed business analysis resulted in the following benefits: Inventory Record Accuracy improved to 95% within 2 months Stock levels reduced by about 30% across stocking points in the supply chain Complete visibility was achieved in the supply chain with respect to damaged goods inventory

Email: debjyoti_paul@sifycorp.com / k_ravichandran@sifycorp.com

Sify Ltd, India

Makes Supply Chains Lightning Fast

Organisation Background: The firm was a leading consumer products company dealing in cosmetics and personal care products with its head office located overseas. The company had a supply chain network of 3 factories with bonded stock rooms (BSR) attached for despatch to the depots and 35 depots for servicing distributors. Goods move from the factory to the BSR. BSR despatches stocks to Mother CFAs (depot). Other depots receive stocks from the Mother depot and sell them to distributors. Key Concerns for the Company: 1. To reduce inventory level at the BSR and depots. 2. To improve inventory accuracy at stocking points including both BSRs and depots 3. To identify the damaged stocks across the chain and initiate action in a timely manner

Focus of Study A study was completed focusing on the 1. Inventory-related issues at BSRs and depots. These included: Inventory holding as a proportion of sales Practices employed for track goods in the warehouse Proportion of fast and slow moving stocks to the total inventory Linkages of factory dispatches to BSR with patterns of BSR dispatches to depots Accuracy of inventory records especially of fast selling lines 2. Demand Planning process. The study looked at: Forecast Accuracy and process of reviewing and revising forecasts Level of safety stock at each location combined with process to review and reset the same Linkages of forecasts and consequent despatches with relevant available closing stocks at depots

Email: debjyoti_paul@sifycorp.com / k_ravichandran@sifycorp.com

Sify Ltd, India

Makes Supply Chains Lightning Fast

Findings Key Business Indicators 1. Total average inventory holding at BSRs was 8.2 weeks of sales 2. Average inventory holding at the depots was 6.5 weeks of sales 3. Depots were holding High inventory of old/withdrawn stocks Damaged stocks for a long time (over 3 months) 4. Book and physical stocks had discrepancy of over 30% Conclusions 1. High Inventory Levels: Inventory levels were very high across the distribution chain on account of: Sales and despatch forecasts that were not in line with actual primary / secondary sales There was no process to periodically review and refine the Annual Forecasts, in line with market feedback Stocking across all points in the distribution chain was driven by a push-oriented system that did not have provisions to be tuned to market requirements Actual safety stocks maintained at depots were significantly higher that target safety stocks agreed at the beginning of the year. No system was in place to monitor and correct the same during the year Stock allocation from depots was manual. Orders received from distributors were manually processes and no process was in place to automatically collate orders and allocate stocks

2. High Levels of Old / Withdrawn / Damaged / Slow-moving stocks: Dead stocks were allowed to accumulate in the system mainly because: There was an absence of visibility into inventory details across stocking points...
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