Repositioning Inventory to Support Channel Strategy
This power tool manufacturer and distributor operated with a regional distribution center strategy. Full
stocking of all products was maintained at the regional distribution centers. Product availability levels
were insufficient on key items resulting in extended out of stock situations sometimes lasting months.
-Analyzed sales velocity on each item by shipping location and determined that there were a large number of items being ordered very infrequently. All items were available at all locations. The manufacturing strategy on these tools was build to order, which caused multiple low volume production runs.
-Revised strategy on tools to maintain stock on the largest volume items (85% of sales and less than 20% of items) at each distribution center. Automatic re-orders placed based upon stock levels. Discontinued stocking of low volume tools at each distribution center. Shipped direct to dealer network via Federal Express which bypassed distribution center and pulled from centralized stocking point.
-These low volume tools generally had inventory somewhere within distribution network, although never at the right location. By centralizing stock location and developing expedited shipping, fill rates and length of out of stock situations both dramatically improved. Also allowed consolidated, larger production runs driving some efficiency.
-Analysis and strategy extended to stocking of consumable items (fasteners). In this case, worked with customers to convert to next available size on very low volume items. Priced slightly higher cost product at same price as low volume item that was discontinued.
-Total system inventory reduced sufficiently to close off site distribution center near manufacturing plant and relocate all inventory and shipping to manufacturing location (ship direct to customers and to regional distribution centers).
ates increased from low 80 % level to 95 % for entire mix of products within 6 months.