Case Study:  Lean Design - Inventory Management Source Switch

Situation and Objective

  • $32MM of old Source item inventory

  • Returns process included multiple purchasing departments and unnecessary complexity

  • Lack of accountability of old source item inventory

  • Lack of standardization among buyers

  • No SOP for Source Switch Process

  • No SOP for Demand Shift Process

  • Insufficient Returns / Demand shift tracking

Approach

  • Define process data and financial measures

  • Form cross-functional team to process map current state

  • Eliminate non value add process steps and re-work loops in both the Demand shift and Switch return processes.

  • Brainstorm improvement areas and prioritize

  • Create Generic Source Switch Return Standard Operating Procedures (SOP)

  • Create Demand Shift SOP for the buying group for a consistent and accurate shift from old to new source item

  • Assign accountability and responsibility for returns process

  • Implement changes and measure results

Results and benefits

  • Reduced Generic Source Switch return process cycle time from 6 months to 2

  • Achieved a reduction in carrying costs of $557,000

  • Utilized telemarketing unit in the Returns Process to sell distressed inventory

  • Achieved $2MM in additional net income