CASE STUDY

INVENTORY MANAGEMENT TOOLS FOR VALUE

Grainger Consulting Services worked with a market-leading international manufacturer of plastic consumer packaging products to complete a baseline analysis of its current maintenance, repair and operations (MRO) inventory management practices. This project focused on the largest of the company’s more than 95 U.S. based manufacturing facilities.

OVERVIEW

OPPORTUNITIES& GOALS

of overall transaction time is spent on internal travel and hunting

35%Gain visibility to indirect material spend and inventory system performance

Baseline current state activities from which to measure installed improvements and recommended opportunities for improvement — defined savings

Outsource responsibility for management of spot-buy procurement and inventory management (including point-of-use dispensing, centralized storeroom operations, etc.)

Leverage the customer’s Enterprise Resource Planning (ERP) system for management of all indirect materials inventoryEPR

Of the approximately $2.6 million in system managed inventory, 72% is inactive (non-critical items with no purchases or issuances) and 24% is slow moving (non-critical items with infrequent demand)

Only 1 of 20 customer-owned inventory staging locations has an inventory management system

Limited issuance tracking and control results in high product waste and secret stashes

35% of overall transaction time is spent on internal travel and hunting (non-inventory)

76% of material is neither managed through the central storeroom nor tracked using customer material numbers

OBSERVATIONS & FINDINGS

RECOMMENDATIONS & IMPACT

Grainger KeepStock Secure® solution is subject to customer eligibility established by an on-site assessment conducted by Grainger’s Consulting Services group, mutual agreement on frequency of use of Grainger personnel resources and other agreements.

Note: Savings my not be typical for all customers.

Grainger Consulting Services identified the following solutions with dramatic savings potential. By working with Grainger, the customer has more than $1.5 million (or 58%) reduction opportunity against approximately $2.6 million in on-hand inventory value available to them by improving the way it manages its inventory and process:

Designed, built and staffed a new centralized customer storeroom

Impact: 24 minutes or about 54% reduction in product search and travel time spent per transaction. Storeroom and vendor-managed point-of-use (POU) inventory were positioned in locations best suited for convenience of plant personnel. Material storage and management was optimized.

1

Impact: Over 45% reduction in customer manpower and incremental investment in Grainger on-site resources to manage MRO inventories, lowering the customer’s approximate cost from $1.2 million to $1.1 million. This was accomplished by reducing customer time spent shopping, selecting suppliers, ordering, expediting, putting away product and processing payments.

Implemented an inventory management methodology to include Grainger’s POU, KeepStock Secure® dispensing; vendor-managed inventory (VMI); and the customer’s ERP

2

Impact: Create orders against items found in the system, build usage history and adjust inventory levels to meet plant demand and critical needs. Increase customer cash flow as inventory purchases and overall investment declines by $1.5 million resulting in $272,000 in carrying cost savings.

Collect and load MRO material data into customer ERP system

3

Identified over $2.3 million in cost savings, including inventory burn off and $405,000 in carrying cost savings4

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