Inventory turnaround: boosting service while reducing assets
Air Liquide’s inventory consists of cylinders and bundles filled with gases. Total inventory was too high, resulting in low inventory turns.
Correcting the imbalance is achieved by converting one type of cylinders into another and needs to happen in retesting centers. This requires time and comes at a cost.
In order to get a clear view on the current situation, Möbius executed an intensive audit, both interviewing key players in the stock management process and analyzing the current planning system.
This audit resulted in an action plan, structured around three tracks:
- Improve inventory accuracy : Through weekly stock count of a subset of items, root causes of inventory inaccuracies were revealed. To address them an action plan was implemented.
- Update calculation model for stock targets (what is a realistic target) : The existing model was adapted to include the required buffer in empty cylinders and bundles to cover differences between the demand for full cylinders at the one hand and empty cylinders returned at the other hand.
- Start rebalancing and lowering inventories : The realistic inventory target, resulting from the updated model, is compared to the corrected stock data on SKU level in the ERP system. In order to correct the imbalance, one type of cylinders needs to be converted into another. This happens in retesting centers, which requires time and comes at a cost.
Collaboration with Mobius has led to the following concrete results:
Potential revealed through audit :
- The overall stock can be reduced with 51%, hiding significant imbalances: some items required an inventory increase while other items required an even bigger reduction.
- Stock accuracy between 40-70%, with 90% as a benchmark minimum.
Improve inventory accuracy :
- Reach 90% minimum benchmark in 3 months.
- Sustain continuous improvement to reach 95% by the end of year one.
Updated model for calculation of stock parameters :
- Updated calculation model available to central stock expert.
Execution of inventory reduction plan :
- Central stock team working on rebalancing and reducing inventories with the anticipated 51%.
Möbius helped us to have a clear view on the hidden problems in stock and asset management and to set up the action plans. They updated our tools with more accurate formulas. We are under way now in optimizing our inventory.