Reducing inventory for a specialty chemicals company in a competitive global market.
This story is for executives who:
- Are facing rapid demand but can’t fulfill orders
- Suffering capacity and raw materials challenges
- Reliant on a few suppliers.
- Have immature procurement and certification processes and KPIs
The Challenge
This client develops, manufactures and markets engineered specialty chemicals for a variety of uses and industries. Executives called in Maine Pointe to help identify and overcome some significant challenges they were facing in the hydro-processing catalyst (HPC) segment of the organization. The segment serves a highly competitive global market with multinational, regional and governmental clients.
Our analysis identified a number of critical issues, including:
- Siloed functional organizations with little coordination to achieve strategic business goals across functions or geographies.This was a result of the incomplete integration of a major acquisition made 5 years prior
- Over-reliance on technology differentiation in a business becoming increasingly commoditized through global competition
- 2,600 metric tons of “legacy inventory” that wasn’t turning after years of trying
- The sales and operations planning (S&OP) processes had little sales and marketing ownership, resulting in high plan operating costs and low inventory turns
- No effective Management Operating System (MOS)
- Ineffective and unreliable Maintenance Management System (MMS)
The solution
Maine Pointe’s team of industry and practice experts worked closely with our client to:
- Design and implement a process that aligned clear functional responsibility and goals for inventory reduction
- Deploy a new inventory model and order policies to shape demand toward preferred products
- Institute new processes redesigning S&OP and clarified roles and responsibilities, improving responsiveness to real demand, and eliminating builds from “phantom demand”
- Define common key performance indicators (KPIs) for operations and maintenance
The Results
- Reduced “legacy inventory” by $4.3/530 metric tons in 3 months, with a plan in place to reduce from 2,077 to 500 metric tons within a year
- Client has a roadmap for implementation of an effective and reliable maintenance system
Lessons learned for other executives
- You can create supplier optionality in a resource constrained market to meet demand fast (people)
- Addressing sourcing constraints to fulfill demand (growth) can have a double-digit positive impact
on your share price - You can accelerate the qualification process of new suppliers to improve material and product
time to market