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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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