Forward-Looking Planning Tool Allows Management to Anticipate—and Reverse—Inventory Buildup

Situation Analysis

Management at a global life science company was growing increasingly concerned as inventory stock accumulated, creating a burden on cash flow even as corporate earnings increased. Inventory buildup had been aggravated by the acquisition of several production facilities whose previous owners had managed for maximum utilization. The corporate planning team began looking for options to streamline operations and improve cash flow.

The team had limited visibility on the outlook for inventory, as the information was segmented and spread across multiple databases. In addition, each facility had its own legacy production planning system. The CEO realized that the first step to reducing inventory would be to develop a single, transparent view of future inventory stock that would be consistent across the different facilities. Strategic Decisions Group was brought in to develop a tool that would provide insight into future inventory levels for all facilities.

Discovery & Solutions

The SDG engagement team started with a deep dive to understand the existing business processes and identify the challenges, such as multiple disparate data streams, outdated or duplicate data, and different IT platforms. The team then set about developing an easy to use, flexible, integrated tool that could account for changes in inventory over time. A dashboard of charts displayed the most important metrics in an easy-to-understand manner. This custom tool was designed to provide valuable insights to both the planning team for daily scheduling and management for reviewing inventory buildup and reporting to investors.

The analysis and development of the inventory planning tool drove a distinct change in behavior across the organization to foster better inventory forecasting. SDG established new processes to ensure data consistency and effectiveness. Specific timelines were put in place for data updates and analysis, so that data would be consistent across the multiple sources and the results would be comparable from month to month.

Results & Impact

This novel tool and the associated processes that were developed left a lasting impact on the organization. With the new inventory planning tool in place, management was now able to see the buildup of inventory and trace it to specific materials and processes. The tool could pinpoint the top-contributing inventory items, allowing the planning team to focus its efforts on those areas that would have the greatest impact. The team was able to forecast inventory buildup and prevent accidental overstocking or shortages of raw materials.

With this tool in place, management and the planning team benefited from improved inventory visibility and consistency across facilities. The tool allows the planning team to understand the impact on inventory every time the production plan is updated. Management can now review a uniform set of outputs across all facilities, making comparisons easier.