Company Overview: $300M pipe distribution company
Process Improvement
Performance Issue
- Too little inventory of what sold too much of what didn’t.
- Buying at sub-class is too broad & contained many SKUs with little or no sales.
- Looked at on-hand qty & not historic sales.
- Too much inventory at branches
- Needed a way to model new branches & Mobile pipe yard.
Improvement Approach
- Inventory analysis was done according to the end location of the customer, not by the warehouse it was shipped from.
- In our analysis, we considered size, sales $’s, gross margin, quantity sold and number of customer orders.
- Vetted SKU lists with Branch Managers
Results
- Removing 600 pipe & valve SKUs would impact just 4% of sales.
- Potential to remove or reduce 70% of SKUs at branches for Pipe, Valve & Flanges.
- 29% moved to HUB go straight to customer reducing overall freight.
- Branch Mgrs. had little confidence in removing do to delivery issues & that they are not held to turns or ROCE.
- 31% of branch SKUs should have lower safety stock levels