Year
2019
Type of Project
Inventaire
Savings
3M$
Directed by
Martin Nadon
Overview
Customer Presentation
Our client is the Canadian leader in the auto glass replacement, repair and distribution sector.
Mandate
C2.0 has been mandated for a project to optimize the supply chain, more specifically in terms of demand management, purchasing and the distribution network of these warehouses.
Client's goal
Increase system usage and revalidate parameters for demand management. Ensure employee training to ensure a continued understanding of the system.
Execution of the project
C2.0 was mandated for a 16-week term. As part of the mandate, the approach proposed and adopted by the client consisted of 5 steps:
According to Pareto’s classification, we established distinct categories in order to establish adequate inventories according to the type of products and to ensure that we maintained an optimal inventory for the client’s demands.
We have adjusted the level of service in order to answer correctly to the inventory classification. Thus, we have increased the level of service for inventories classified A and B and it has been revised downward for inventories classified C or lower.
We have standardized the replenishment cycle to define the optimal reorder point calculation. This has resulted in higher inventory turns for high-volume products and also minimized orders by purchasing 3 to 6 months of inventory for low-volume items, thereby reducing product handling and reducing breakage losses.
The client had two delivery times, one contractual and one calculated. Therefore, we recommended the use of a single delivery time for suppliers, which allowed to reduce the minimum inventory level for all items. It also allowed to manage a more accurate material receipt date because suppliers deliver on time, so the additional calculated lead time that was in the system had no added value.
To optimize inventory, we set the min/max parameters based on a weekly order lead time, a safety stock that takes into account the distance between the warehouse and the distribution center, and a replenishment cycle based on the size of the warehouse.
Results
The optimization of operations that C2.0 carried out at the client’s site resulted in overall savings of just over $3,000,000.
- Improvement of the service level and replenishment cycle for the new categories: $1,400,000 in inventory reduction.
- Adjustment to the management of categories (Windshield and Tempered Glass): Additional inventory for the "Tempered" category of $388 000 for class A and reduction of $229 000 for classes C and less.
- Adjustment of delivery times for all suppliers in the "Glass" category group: $1,200,000 inventory reduction
- Modification of the inventory profile (service level, delivery time, etc.) of the warehouses for Accessories = $640K inventory reduction, representing 30% of the warehouse inventory.
We also observed, during our mandate, that the client had $1.7M in obsolete inventory, in addition to $8.3M in “excessive” inventory for a total of $10M on a $20M inventory. Thus, we suggested to the client to reduce its inventories in order to limit its costs related to its excess inventory.
