Aerospace firm embraces holistic inventory transformation, saves millions
A successful organisation is one that can deftly coordinate its many moving parts, but, sometimes, even the best organisations can get out of sync. That was the case with an aerospace company and its inventory. The organisation knew it was operating with too much stock and was even holding millions of units after they had been written off the books. The company made numerous attempts to optimise its inventory, but when those efforts came up short, the CFO reached out to Protiviti to conduct an assessment of the company’s inventory management process.
Together with Protiviti, the firm set two major objectives:
- Identify quick wins that would impact inventory reduction goals immediately.
- Identify long-term supply planning process improvements that would have far-reaching effects on lowering costs and optimising inventory.
Following a 12-week assessment of five of the firm’s manufacturing sites, the Protiviti team identified three major areas of potential organisational improvement and suggested nine detailed recommendations. Within the first month after the review, the organisation was able to reduce its safety stock ordering levels by $1.5 million, or 75%. To date, it continues to see improvements.
The organisation made a number of other measurable improvements over the same one-month period, including lowering the minimum order quantity (MOQ) on items where the MOQ represented three or more months of demand, which reduced the value of inventory needed to be held by $2.9 million. The assessment process included stakeholder interviews, policy appraisals and process analysis, each yielding major discoveries that led to greater efficiencies and significant savings.
Understanding the source of inventory inefficiencies can be eye-opening, particularly when seemingly insignificant factors, like buyer behaviors and incentives, have significant and measurable financial impacts.