Developed new inventory strategies to balance needs of different cultures and minimize total costs.
Company
US division of large privately held manufacturer of frozen potatoes and appetizers
Reduced risk of Obsolete Inventory
Minimized Inventory & Production Total Cost
Improved Collaboration
Situation
- Company had recently acquired a new subsidiary that continued to market and sell independently.
- Company closed one plant from the acquisition and moved production into existing plants.
- Company and subsidiary were on different ERP systems.
- Company produced items to stock and maintained inventory in multiple DCs.
- Subsidiary continued to produce to order (PTO) at one remaining plant under their control.
- Company and subsidiary had different freshness guarantees to their customers of remaining shelf life.
- Products that had less than guaranteed shelf life remaining became obsolete and required liquidation at unfavorable margins.
- 87 PTO items from closed plant were transferred into three existing high-volume make-to-stock plants. These items continued to be distributed through the subsidiary’s network.
- Subsidiary was concerned about obsolescence of inventory aging out from producing these items to company’s standard minimum runs rules.
- Company was experiencing significant challenges in inventory and disruption from changes to orders of these PTO items inside their normal six-week frozen production schedule horizon.
Solutions
- Developed production and inventory strategy for PTO items using traditional EOQ modified for demand volatility to minimize total cost – balancing setup cost with holding costs and obsolescence risk.
- Developed and maintained process to consolidate planning between two organizations with different software platforms.
Benefits
- Delivered solution that minimized risk of obsolete inventory to subsidiary without significantly increasing production costs for shorter runs at company plants.
- Improved planning collaboration between Company and Subsidiary.