Case Study: Reducing Excess Inventory

By Leah Hoffmann

It’s hard to pass up a good deal from one of your preferred suppliers. But when the inventory piles up in your warehouse because you don’t have the other materials you need to manufacture your products? That good deal starts to seem less attractive.

Frustrated by inventory inefficiencies, supply chain leaders at Ukrainian pet food company Kormotech began searching for solutions. The company produces 43,000 tons of pet food per year and exports its products to 18 countries worldwide. Yet inventory issues were causing long lead times and low service levels. A similar situation was happening with the finished goods inventory at Kormotech’s distribution center.

The DDMRP methodology stood out for its simplicity, and the company decided to move from cost to flow based material planning. Benefits came soon after the company implemented Replenishment+, the industry’s leading DDMRP solution.

In fact, repositioning inventory based on reliability, lead times and cost optimization yielded immediate results, reducing lead times from 17 to 9 days and shrinking inventory value by 25%. Applying the Replenishment+ concept of Demand Driven buffers — and automatically pacing replenishment to the rate of consumption — brought further improvements.

Within six months, raw materials overstock decreased by 50%. Within a year, total finished goods inventory decreased more than 45%, while production capacity increased by 40%. Variability decreased by more than 50%, and service levels rose to an average of 99%.

“Replenishment+ is the next step in planning. I always know what is necessary to produce and the optimal time to produce it,” said Roman Dyda, Kormotech’s Production Planning Manager. 

The planning workflow is easier, too. Planners get all the information they need to approve orders in batches, while maintaining fast access to detailed information about item history if they need to go deeper.

To learn more about how Replenishment+ helped Kormotech reduce excess inventory, check out the case study.

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