Major Poultry Provider’s Inventory Management Overhaul
Optimizing maintenance, repair and operations inventory management processes for a more efficient, cost-effective organization
Intro
A leading American producer of high-quality poultry products, the company has continuously evolved to keep pace with the industry’s changing demands. While honoring its legacy, it has successfully adapted to market shifts and the complexities of modern industrial management.
Background
This trusted American poultry producer, with a rich history spanning eight decades, faced a pressing need to optimize its maintenance, repair, and operations (MRO) inventory management processes. Despite its longstanding reputation for excellence, the company recognized the imperative to streamline operations, particularly in light of its expansion across the West and East Coasts. The transition in ownership, coupled with evolving industry standards, underscored the need for the organization to enhance efficiency and cost-effectiveness in managing its extensive inventory.
The Problem
The company was concerned with the accuracy of their MRO inventory. They also wanted a review of their MRO inventory management processes against a best practice model. This included a detailed review of their processes for identifying obsolete spare parts. In addition to those traditional materials management objectives, or perhaps in some part because of them, they had a large volume of direct purchase orders for parts that could or should have been included in the MRO inventory. Moreover, the diverse geographical spread of its operations posed logistical complexities, requiring a cohesive approach to standardize practices company-wide. With a keen focus on operational excellence and cost optimization, this poultry giant sought to address these challenges within a specified timeframe, requiring expertise in MRO inventory management and strategic implementation.
The Solution
In response to this company’s needs, the LCE team undertook a comprehensive revamp of their MRO inventory management practices. We started by assessing business processes and developed a gap plan aligning their current process and best practices. We conducted a complete physical inventory of 29,448 bin locations across ten storerooms to establish actual inventory levels.
Following this initial phase, we formed a site focus team to train in best practices for materials management processes and develop a customized version of those business processes tailored to the company’s needs.
In parallel with that effort, another team analyzed the 13,197 unassigned line items, totaling a purchase value of $10,918,975, to understand what was being purchased. We then recommended which parts should be added to the inventory and managed through the MRO process.
Through SAP data extraction and analysis, we identified duplicates and obsolete materials, facilitating a streamlined inventory structure. To ensure a smooth transition, we conducted hands-on training sessions based on the derived best practices and lessons learned. These sessions equipped the company’s personnel with the necessary skills to optimize inventory control.
The Results
Through our collaborative partnership and the implementation of standardized processes alongside cutting-edge technologies, this leading poultry provider experienced tangible improvements in operational efficiency, cost reduction, and risk mitigation within its inventory management system. During the review of MRO inventory, we discovered 16% of the inventory on hand exceeded the established maximum inventory levels, amounting to $4.1 million. Additionally, we identified another 11% ($2.8 million) reduction was possible by adjusting the reorder point to sustain a 95% confidence in no stock-outs, and limiting order quantity to 90 days of average consumption. During the review we identified a total of $59,000 in new MRO materials.
Additionally, streamlining operations led to a 25% reduction in procurement lead time, contributing to significant cost savings and enhancing their competitiveness within the poultry industry. These achievements further solidified the company’s position as an industry leader, emphasizing its commitment to quality and efficiency.
Quick Summary
A leading poultry producer sought assistance in optimizing its MRO inventory management processes amidst its expansion across the West and East Coasts. Our team initiated a comprehensive approach to overhaul their practices, which involved:
- Conducting thorough assessments, physical inventory checks, and analysis.
- Identifying excess inventory valued at $4.1 million and proposing adjustments that led to an additional inventory reduction of $2.8 million.
- Achieving a 25% reduction in MRO procurement, enhancing operational efficiency and cost-effectiveness and further reinforcing their status as an industry leader dedicated to quality and efficiency.
