An automotive supplier had prescribed an efficiency improvement program. In this context, the interim manager was hired to reduce the material inventory in a plant by 15 percent and at the same time increase the inventory turnover rate from ten to 14 per year.
In optimizing materials management, the interim manager was only able to build on existing processes to a very limited extent. Several employees had left the company in the months prior to the interim mandate. Clearly defined and formal rules for processes in purchasing and materials planning were virtually non-existent, as the employees had previously mainly drawn on experience.
3,000 active materials segmented by product line and value-added stage
The interim manager quickly developed a concept for materials management. First, he segmented around 3,000 active materials by product line and value-added stage (raw material, purchased part, semi-finished product, finished product) and determined the inventory turnover for all segments. ABC analyses within the segments provided information on which materials contributed to the company's turnover and how. In addition, the interim manager used order lots, order frequencies and consumption to determine a target stock level for purchased parts and compared this with the actual stock level.
Corrective and proactive measures to avoid sleeper products
The inventory analysis resulted in three areas of action for sleeper items, raw materials and purchased parts from specific manufacturers. The interim manager defined corrective and proactive measures for each segment. Corrective measures ensured a rapid reduction in inventory. Proactive measures prevented inventories from growing again in the future.
As a corrective measure against sleeper items, the interim manager initiated a sell-off and recycling program in close cooperation with the sales department. On the proactive side, there were now clear agreements with customers about the life cycle of a product and the transition to spare parts production. This made it possible to stock spare parts in economically viable quantities in future.
Material requirements planning for raw materials and purchases optimized
For raw materials, the interim manager defined minimum stock levels, order lots and replenishment times in close coordination with all parties involved. Stringent processes based on the dual control principle now ensured that the new rules were adhered to.
Purchased parts are planned according to material requirements planning (MRP). Since then, call-offs from suppliers have been continuously adjusted to customer call-offs. The interim manager implemented a short-term process that reacts very quickly to fluctuations in demand. In the long term, contracts (lead times, frozen zone between customers and suppliers) are harmonized.
Convincing stakeholders of the benefits of lower inventories and complexity
One of the biggest challenges for the interim manager was to sensitize stakeholders to the particular importance of the issue of working capital. In particular, it was a matter of convincing those involved of the advantages of lower inventories and complexity. In the end, the employees particularly appreciated the proactive spare parts planning, as it eliminated "old burdens" in the medium term and reduced the associated additional work. Detailed interviews, workshops and proactive communication on all steps ensured that employees were taken on board for the new material planning process.
ERP system: special reports and system queries for 150 critical materials
The customer's ERP system posed a further challenge. Customer requirements arose from call-off plans that defined daily, weekly or monthly delivery quantities over a time horizon of twelve months. The call-off plans were transmitted daily and could be changed daily. Some of the call-offs were binding and there was agreed flexibility for changes. To this day, the client's ERP system does not offer the option of automatically recognizing changes in customer requirements and reacting to them appropriately. Typical examples of this are additional costs due to accelerated delivery (air freight instead of sea freight) or short-term rescheduling in production (unfavorable batch sizes or production sequences). The limitations of the ERP system could only be solved by a semi-automatic process. As a result, 150 critical materials (according to ABC analysis) are now monitored manually using special reports and system queries.
Renegotiating unfavorable agreements on delivery times
Another stumbling block was contractual agreements on delivery times, where customer requirements and supplier capabilities were not aligned. For example, customers were able to change their call-off with a lead time of a few weeks. At the same time, the company had granted suppliers significantly longer delivery times for parts with large batch sizes and/or sea freight. In order to eliminate this imbalance, the interim manager held initial discussions with customers and suppliers during the mandate.
Material inventory reduced in line with the order and sustainable processes implemented
At the end of the interim mandate, a reduction plan was drawn up that reduced the total inventory by 15 percent in line with the order. The reduction plan showed specific and material code-related activities for sleeper items, raw materials and purchased parts. The reduction plan was supported by an inventory tracker, various templates for planning raw materials and clear processes for ramp-up and ramp-down.
The interim manager supported the reduction plan in the initial phase. He then handed over further execution to the client.
