SCM Case Study: Stock Reduction

Global pharmaceutical company

EPGDIB 16-18, Group 05, Section A

Amit (03), Garima (10), Nitin (19), Rupesh (33), Shobit (36)
Challenge

1. The challenge was to help the client to establish an integrated

supply of its industrial (MRO) materials resulting in a reduction of
stock held by the business.
Problem

1. The business was used to holding large levels of stock to mitigate

'outage' concerns on the production line and due to historically
taking advantage of volume discounts. Additionally, employees
were used for 'ad hoc' ordering which was often non-essential and
undermined plant profitability.
Objective

1. The challenge required IESA to reduce the working capital of the

business as a result of improved inventory management.
2. Improve overall efficiency of stock delivery by reducing lead times.
3. Ensure that stock holding was economic, timely and efficient for
the production requirements.
EOQ Model
EOQ Model can be used for the following :
a. Optimizing Order Size
b. Inventory reduction .

ROP tells us when to order :

ABC Analysis
High priority items
20% items make up 80% of total annual dollar usage
Monitor most frequently to guard against stockouts
Percent of annual dollar usage

A Items Medium priority items

80 40% items make up 15% of total annual dollar usage
70
Low priority items
60 40% items make up 5% of total annual dollar usage
50 Counted less frequently

40
30
20 B Items
10 C Items
0 | | | | | | | | | |

10 20 30 40 50 60 70 80 90 100

Percent of inventory items

Solution
1. Reducing stock reordering to ensure that only the correct volumes of items were in
stock at one time.
2. Introducing 'Low Impact Reduction' techniques to reduce the total volumes of items in
stock without taking any lines to zero and without de-stocking any items.
3. Reduced stock holdings of high use items which were previously ordered bi-monthly,
to holding half the existing amount and monthly ordering.
4. Identified low use items with high stocks and reduced total stockholding and re order
quantities.
5. Mapping of delivery lead times for all items to ensure sufficient ordering time is given
on every line.
6. Issuing of recommended stock levels for all items based on historic and current usage
patterns to reduce overall stock holding.
Thank You!