How Our Inventory Optimization Strategy Led to $1mn in Annual Savings


  • CASE STUDIES
  • February 10th, 2020
  •   323 Views

Maintaining a positive inventory turnover ratio is crucial to the health of an organization’s supply chain strategy. The money spent on managing excess inventory can instead be spent on operating and growth activities.

THE PROBLEM
A premium automobile manufacturer was looking to optimize its inventory management strategy by maximizing returns on storage of core parts and creating a framework to predict core demand.

THE MU SIGMA APPROACH
Armed with our problem-solving accelerators and our first-principles thinking, we deep-dived into the problem areas to understand the root-cause of the supply chain inefficiencies. We initiated several meetings with the client’s core engineering team to get a better understanding of demand for parts and cores. A combination of regression-based and time-series based approaches to forecast demand for parts.

THE IMPACT
Prevented the planned leasing of an additional storage facility resulting in savings of $500,000. The client was also able to optimize existing storage facilities and terminate the leasing of an existing facility resulting in an additional $500,000 in savings.

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