Driving inventory reductions

A globally branded consumer products firm had been trying to reduce inventory for four years, with little success. REL was invited to investigate why little progress was being made.

REL identified that inventory targets were set at six weeks irrespective of replenishment lead times and forecast accuracy was low due to a lack of understanding of best practice inventory management. The situation was exacerbated because Sales forecasts were ignored by planners, whose revised plans were ignored and second-guessed by the manufacturing plants. Product was held at its highest and least flexible position in distribution centers across the US.

To address the imbalanced inventory and to reduce costs, REL introduced a new planning and replenishment approach, based on a sound forecasting process. As a result, regional warehouses held reduced finished goods based on statistical analysis and product was pulled through manufacturing based on customer demand.