Manufacturing
Supply Chain Logistics & Inventory Control

A specialty chemical company with worldwide operations serving the electronics, surface finishing, and decorative industries engaged Daniel Penn Associates to improve its supply chain logistics and inventory control systems. At the time, the company had 14 manufacturing site, six R&D facilities, sales, and distribution centers worldwide and employs 1,300 people.

In their efforts to reduce finished goods inventories and expenses while improving customer service, the company wanted to determine how they could reduce the number of warehouse facilities and service their customers based from fewer locations in North America. At the time, products were manufactured from four facilities and distributed through 22 distribution centers, of which 16 were public warehouses and six were company-owned. Initially, DPA visited with senior managers to define the study objectives in the areas of distribution management and inventory control.

In a nutshell, our analysis was geared to answer three main questions:

1.		Did the company offer too many products to its customers?
2.		Did the company service too many customers?
3.		Did the company maintain too many distribution centers?

After thorough evaluations by our consulting team, interviews with all levels of management, analysis, and customer service reviews, we determined the study culminated in a detailed implementation plan outlining the steps for consolidation and optimization the distribution system. The corrective actions identified included:

		Determining what products should be discontinued, be made to order, conforming with pre-determined days of inventory on hand.
		Deciding what public warehouses were necessary to fulfill the logistics requirements of the organization.
		Determining what warehouses and distribution centers needed to be established (moved and/or consolidated) to fulfill the logistics requirements.
		Recommending which distribution practices must be implemented to control inventory movement, lot accuracy, and optimize physical resources including a stock locator system, a bar coding system, cycle counting, and warehouse space management and stock rotation control.
		Designing a physical warehouse management and inventory control system.
		Implementing a ERP CIMPRO System to improve inventory management to production requirements based on demand.
		Developing management indices and metrics required to: Report and control days of inventory on hand by inventory class; Report and control dollars of inventory on hand vs. target inventories; Report and control accurate customer service results; Control and report freight cost paid by the company for customer shipments and inter-warehouse shipments; and Generate total distribution cost reporting.
		Selecting and implementing a Distribution Requirements Planning system that coordinate inventory needs in a priority-sequenced, time-phased manner to meet customer and forecast demand as it occurs.
		Developing requirements for transportation planning and scheduling based on the Distribution Requirement Planning System.

The direct bottom line results to the company included a 35% decrease in freight to public warehouse costs and 35% decrease in public warehouse costs.

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