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A programme to reduce stocks to actual required levels was implemented and achieved within 12 weeks.
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Reducing stock levels saves both client and customer money
Following the economic crisis in Russia, consignment stock was introduced by our FMCG sector client to ensure stock was available for customers at all times. The selling price could be adjusted as required, based on the moving exchange rate of the euro to the rouble. Later, consignment stock was kept as a lower cost alternative to offering customers increased payment days. As a result, the total value of stock and working capital increased.
Our challenge
We had to reduce stock both in terms of actual value and stock days for the client to meet their targets. We had to do so without adversely effecting sales volume or reducing market competitiveness.
What we did
Firstly, the key consignment stock customers were identified.
Next, by analysing sales information, we calculated how many weeks stock, at average rate of sale, each consignment stock product had.
Based on the customer's circumstances (for example, their distance from the distribution point) we also calculated the number of weeks’ stock the customer needed to prevent an out of stock situation.
Finally, the customer’s need, by product, was compared to the actual.
The outcome
Our analysis showed that customers had on average 30 per cent more stock on consignment than they needed to support their businesses.
A programme to reduce stocks to actual required levels was implemented and achieved within 12 weeks.
Apart from the clear benefit to the client, this was also seen as a benefit to their customers who were able to free up warehouse space and thereby save money.
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