Our client in the household products space procures a variety of packaging materials ranging from chemicals, aluminum, plastic and cardboard.
Over time, the need to carry a wide range of materials for customers and the uncertainty of delivery timing created a significant build up in inventory carrying value, which was constraining cash flow and resulting in additional interest expense.
The organization’s president reached out to Baker Tilly to see how we could help get this issue under control.
Our team of experienced manufacturing advisors quickly responded to the request by discussing the specific challenges of the organization with the president. Upon discussion, we learned that many inventory items are unique to individual customers. Several items also had a short shelf life and were bought in bulk to get favorable pricing.
With a complex range of issues, we proposed developing a set of analytics tools leveraging data automation and visualization platforms to bring insights into where inventory is stored and how long it would take to deplete using forecasting in the manufacturing of future orders.
We relied upon the industry experience to convert finished goods demand to raw material purchases using the bills of materials in the system and were able to identify stranded inventory that no longer had demand. This led to conversations with their customers about an action plan to cover the costs.
The approach we deployed brought inventory levels down by providing targeted information to the right management team members on a timely basis. Some of the specific actions implemented off the timely use of data included:
This came at a time when business volume was up, and inflation was driving unit costs higher. As a result, we were able to free up millions of dollars in cash flow, providing the liquidity needed to expand the business through investment in an upgraded production line.