Regional Distribution Project

($1.2 Billion Medical Devices Company)
Challenge:
  • The subsidiaries in Latin America used to order stock directly from the manufacturing facilities. Due to long lead time, each one had to maintain a high safety stock.
  • High inventory levels increased the amount of cash tied-up and the risk of obsolescence.
  • Our mandate was to develop a new distribution model to be able to reduce regional stock levels without delaying shipments to Clients.
Highlights:
  • Searched and identified locations that could become a regional distribution center. Criteria included:
    • Strategic location
    • Proximity to key markets
    • Number of flights to Latin America
    • Existence of free-trade zone areas
    • Tax incentives
  • Developed a business case with a positive ROI predicated on a lower regional inventory level.
  • Sales forecasts started to be managed on a regional basis as opposed to a country by country basis.
  • Safety stock was reduced in each country and the surplus stock was sent to the regional distribution center.
  • Orders to manufacturing facilities started to reflect regional needs.

Outcome:

  • The regional inventory levels were reduced from 90 to 15 days.
  • Timeliness of shipments to Clients reached 99%.
  • Losses due to obsolete inventory were reduced by 70%.

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ECM Consulting Group | United States