Strengthening S&OP and alignment to inventory process (CS102a)

Reducing inventory for a specialty chemicals company in a competitive global market

This story is for executives who

• Are facing rapid demand but can’t fulfill orders
  
  
• Suffering capacity and raw materials challenges
  
  
• Reliant on a few suppliers
  
  
• Have immature procurement and certification processes and KPIs

The Challenge

This client develops, manufactures and markets engineered specialty chemicals for a variety of uses and industries. Executives called in Maine Pointe to help identify and overcome some significant challenges they were facing in the hydro-processing catalyst (HPC) segment of the organization. The segment serves a highly competitive global market with multinational, regional and governmental clients.

Our analysis identified a number of critical issues, including:

• Siloed functional organizations with little coordination to achieve strategic business goals across functions or geographies. This was a result of the incomplete integration of a major acquisition made 5 years prior
• Over-reliance on technology differentiation in a business becoming increasingly commoditized through global competition
• 2,600 metric tons of “legacy inventory” that wasn’t turning after years of trying
• The sales and operations planning (S&OP) processes had little sales and marketing ownership, resulting in high plan operating costs and low inventory turns
• No effective Management Operating System (MOS)
• Ineffective and unreliable Maintenance Management System (MMS)

The Solution

Maine Pointe’s team of industry and practice experts worked closely with our client to:

• Design and implement a process that aligned clear functional responsibility and goals for inventory reduction
• Deploy a new inventory model and order policies to shape demand toward preferred products
• Institute new processes redesigning S&OP and clarified roles and responsibilities, improving responsiveness to real demand, and eliminating builds from “phantom demand”
• Define common key performance indicators (KPIs) for operations and maintenance

The Results

• Reduced “legacy inventory” by $4.3/530 metric tons in 3 months, with a plan in place to reduce from 2,077 to 500 metric tons within a year
• Client has a roadmap for implementation of an effective and reliable maintenance system

Lessons learned for other executives

• You can create supplier optionality in a resource constrained market to meet demand fast (people)
• Addressing sourcing constraints to fulfill demand (growth) can have a double-digit positive impact
  on your share price
• You can accelerate the qualification process of new suppliers to improve material and product
  time to market