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Inventory Cost Reduction

THE PROBLEM:

 Loss due to inventory write off and high inventory levels

BACKGROUND:

In this case, a large manufacturing company with several strategic business units had inventory-related challenges in terms of write off as well as excess inventory. This was a recurring concern every fiscal period. Inventory-related issues impacted the bottom line as well as cash flow.

THE SOLUTION :

A detailed analysis was carried out using C&E (cause and effect) matrix, FMEA (failure mode and effects analysis) and pareto analysis. Pareto analysis of write off data helped identify root causes of the same. C&E matrix gave the rating of inputs of customer importance from a CTQ (critical to quality) standpoint. C&E was carried out for material planning, purchasing and warehousing. The inputs from C&E were further explored in FMEA. In FMEA, the potential causes for failure modes and corresponding ideal controls were identified; this then formed the basis for a master action plan.

RESULT:

The successful completion of the project led to an annualized reduction of inventory write off from a baseline of 2.4% to 1.4%. There was also an inventory turns improvement of 6.4 to 10.2. The annualized saving from this project was $860 K.

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Crafted by Sujay Kundu

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  • He has personally mentored 550 individuals.
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PRADEEP KUMAR

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Jaibheem Deshpande, Vice President- BD (Training Division)


Jaibheem Deshpande has more than three decades of professional experience. His expertise is in driving Shop Floor Excellence and working with young managers to enable both process improvement and continuous people development. During the last three decades Jaibheem worked in multiple roles in Operations, People development and as Human Resource Manager in many multinational companies, including the TVS group and in CK Birla Group heading Learning and Development for two plants.

He has the unique combination of Technical and Human Resource domain specialisation and has delivered superior results to organizations by being a solid business partner to business heads and CEO. He is very passionate about People Development and in Mentoring individuals and groups. He has received several awards during his career and is certified in Out bound training and Facilitation

ABRAHAM MATHEWS, SENIOR CONSULTANT

Abraham has more than two decades of experience in Quality Management and Operations, including designing quality, environmental and health & safety management systems, managing industrial engineering activities and heading a Plant.  He is an expert auditor of quality systems and in working with teams to implement robust processes that is sustainable.  Having worked in Aerospace and Automotive industry he understands the Industry requirements and is very meticulous in his approach in implementing the required standards.  He is also a trained Lean practitioner and support training and implementing Lean Manufacturing Systems. He also conducts Yellow belt Six Sigma training and supports Green belt training.

M.BALAJI, Principal Consultant, Management Systems

Balaji is a Mechanical Engineer with four decades of experience with the last thirteen years in Management consultancy.  His expertise is in Management Systems, with extensive experience in training, auditing and supporting implementation of Quality and Environmental Management systems.  He is also a qualified tool designer from NTTF and GTTC.

Balaji keeps abreast of the latest changes in international standards for implementing quality management systems and is a Lead Auditor for ISO 9001, ISO 14001, ISO 9001, ISO 45001, ISO 22163. Also auditor for  IATF 16949.  He is a  Lead Assessor for EXIM Bank award for Business Excellence model .  With more than a decade of experience in management consulting, he has conducted 600 man-days of training and 250 man-days of audits; working with more than 35 clients.

Pradeep Kumar, Chief Executive

Pradeep Kumar has about three decades of professional experience against his name.  With multi-location and multi-cultural exposure paired with a Master Black Belt in Six Sigma & Lean, Pradeep’s core expertise comes from over a decade of specialization in a large multinational manufacturing company. He is a Certified MBB in Lean and Six Sigma by SBTI, Texas and trained by Mckinsey Consultants as a Lean Practitioner in Rock Hill-USA.

He currently works with large multinational companies, helping them drive Operational Excellence and implement lean strategies. Pradeep also guides senior leadership towards excellence in execution. He has trained candidates in Lean & Six Sigma in India, China, Japan, Thailand, Europe, Middle East, Sri Lanka and the USA; and mentored more than 500 Engineers and Managers in Lean & Six Sigma in India and overseas.  His expertise lies in understanding gaps in current systems, designing more effective processes and mentoring teams to swiftly achieve organizational goals