Achieving an overall stock reduction of more than 20% in a Pharmaceutical Wholesaler

Challenge

Replenishment Policies and Lateral Trans-shipment

Approach

Planning Prescriptive Simulation-Optimization Analytics

Results

Reduction of over 20% in inventory

Opportunity

Company A was suffering strong regulatory and market pressures mainly caused by a deterioration in the payment cycles. With more than 19 days of stocks in several warehouses and a necessity to sustain high service levels, the changes in inventory management were crucial but highly risky. After an initial diagnosis, it was clear that there was a replenishment and transshipment policy that was not adjusted to their business setting and a lack of transparency within the purchasing and distribution processes.

This scenario posed the right opportunity to develop a project in which success meant a very fast return on investment. With the help of LTPlabs analytical thinking it was possible to undertake such endeavor.

Results

Through a simulation based approach, LTPlabs was able to test new inventory strategies and policies that were fine-tuned to the company’s reality. These new policies included the explicit acknowledgement of a dynamic demand variability, the multi-echelon and multi-site nature of the company, and the service level differentiation between products and clients.

Besides the ability to help us fit the policies, simulation was also critical for a smooth implementation without any service drawbacks. In less than 3 months, the company had a fully operational replenishment policy with straightforward results: a stock reduction of more than 20% and a slight increase on service level.

Results achieved in 3 months

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