The Company wished to reduce the cost of inventory (high stock levels) but were unsure how to achieve this without adversely affecting customer service. They were achieving high customer service levels (98% case fill) but at an unacceptable cost in terms of inventory. Their practice was to manufacture in fixed production lots.

Action

An inventory planning study was undertaken using simulation.

Result

The simulation model was used to show that a reduction in inventory of 19-20% with similar reductions in inventory costs would be achieved by:
a) more flexible manufacturing in terms of production lots
b) improved safety stock holding based per product rather than blanket weeks cover.
As planning was undertaken at a product by product level a 1% increase in overall customer service was also gained (99% case fill).