Players in the manufacturing industry are continuously pushed to reduce their operational costs to strive in a highly competitive global market. Under such demanding environment, our client, a packaging firm, struggled to achieve optimal inventory levels across its main raw material, whose acquisition costs account for more than 50% of the COGS (Cost of Goods Sold).
As a result, this project initiated to develop a methodology to support the company’s raw-material purchasing process, which contributed to the reduction of excessive raw-material stock, while ensuring the best possible trade-off between acquisition and inventory costs.
To leverage a more holistic and data-driven decision regarding the raw-material purchasing process, the devised solution followed a three-fold approach:
By providing an analytics-driven integrated view of the raw-material purchasing process and reducing the overall effort in placing clear-sighted purchasing orders, the project fostered the company’s monitoring culture and ensured effective management of its raw materials inventory.
The optimization of purchasing orders allowed the packaging firm to reduce its acquisition costs by 17% and enhance the management of its raw materials inventory through a decrease of more than 2 weeks of stock coverage. Moreover, apart from reinforcing the interconnection amongst distinct departments, the integration of the complex productive context induced a significant forecast accuracy improvement (of 9p.p) regarding raw materials consumption.
By: Joana Teixeira , José Queiroga , Diogo Sá