Cutting stocks while increasing service


Working capital management

Challenge

A Swedish high-tech company serving retail and financial segments in Europe, Asia and North America had contacted MYSIGMA to better handle their stock management and sourcing practices, as they were currently plagued by high capital costs and unstable purchasing processes. In the current setup the local markets themselves held a significant portion of the global stock, a practice that had led to inertia and low turnover of some stock locations.

Solution

To lower the amount of capital tied up in stocks and operations a new more comprehensive policy was devised. After careful segmentation of the current assortment based on service requirements, stocking costs and lead time sensitivity the need for a central warehouse was obvious, as well as its location in Northern Europe. The only items left out of the stock relocation were those few lead time critical articles that was still kept in the local markets, to ensure that delivery speed wasn’t compromised. The centralised system allowed for a more efficient stock planning and hence more stable and cost minded sourcing.

 

Impact

The redesign of the stock keeping framework, both physical- and policy wise, led to some remarkable benefits in untying working capital from the current operations while adding an efficiency dimension to the practice of purchasing and storing needed stock, mainly due to centralised management and aggregated volumes. The performance boost for the client is self-evident as can be seen by the bullets below.

  • Reduced total stock levels by 30% (20 MSEK)
  • Increased service levels from 96% to 98%