Case study: Effective inventory reduction in an industrial company during the post-COVID era

Our customer, a renowned manufacturer of industrial products such as fans and blowers, faced a number of challenges following the coronavirus pandemic. The global economy was recovering, but supply chains were still unstable. The procurement of semiconductors, a key component of production, proved difficult. In response, the company produced products that were not needed immediately but served as a hedge against potential supply bottlenecks. In addition, customer call-offs were extremely volatile and cancellations of large order volumes were the order of the day.

However, this strategy of stock production led to an unexpected problem: a significant increase in stock levels at the subsidiaries. For a long time, the stocks there were a kind of "black box" for the parent company. Many items had stocks for 52 weeks range and more, while delivery times for some items were up to 80 weeks. This overproduction and the associated high stock levels not only put a strain on the company's liquidity, but also led to customers switching to competitors to cover their requirements.

Our task was to optimise the company's inventory management and reduce stock levels in the long term. The following measures were taken to achieve this:

Transparency and analysis:

A comprehensive ABC-XYZ analysis was carried out to categorise the items according to their importance and sales relevance. This analysis showed that a reorganisation of the articles and production based on either make-to-stock or make-to-order would offer considerable reduction potential. In many subsidiaries, items with extremely high stock levels only accounted for a small proportion of sales.

Inventory management:

Immediate measures were taken to quickly reduce stock levels. These included stopping orders for low-priority items, special sales campaigns for surplus stock and even scrapping obsolete products. Particular attention was paid to items with a low turnover share of the total volume, which nevertheless took up a considerable amount of warehouse capacity.

Process optimisation:

The reorganisation of ordering processes in sales was an important step in ensuring that future orders better reflect actual demand. The introduction of a tracking system for inventory development enabled trends to be recognised at an early stage and appropriate measures to be taken.

Customer orientation:

Short, medium and long-term inventory targets were defined in close cooperation with the sales companies. These targets were intended to optimise demand planning and increase customer satisfaction. The appointment of inventory managers in the sales companies ensured continuous monitoring and compliance with the inventory targets.

By consistently implementing these measures, the company was able to sustainably reduce stock levels and improve liquidity. The introduction of an effective inventory management system enabled the company to react more flexibly to market fluctuations and increase customer satisfaction at the same time.

Overall, the successful management of the inventory problem is proof of our company's ability to develop and implement effective solutions even in challenging times.