Lean Supply Chain
Deploying Lean Supply Chain systems at a leading FMCG group in Sri Lanka. The project aimed to optimize inventory & service levels.
A Pull system for inventory replenishment was established. Monitoring & review systems helped sustain the gains.
Dramatic improvements in service levels, reduction in cost of operations and reduction in overall inventory levels.
Situation – deep dive
SSA recently concluded a project on Lean Supply Chain at one of the leading FMCG groups in Sri Lanka. The group’s distribution centre was the focus and at the heart of the transformation journey.
This project aimed to optimize the finished goods inventory, which was bulging out of control and demanded a serious review of the overall demand management system. The methodology included application of Lean supply chain management methods with an aim to design a state-of-the-art, Pull based systems.
The following were the objectives of the initiative:
- Study the existing system of Supply Chain
- Set-up a scientific method for Planning
- Convert the traditional Push system into a Pull system
- Reduce Finished Goods Inventory levels
Actions Taken – deep dive
It was observed that the entire system worked on a “Push” basis with limited linkage between what is sold and what is produced. Therefore as a first step, a Pull system for inventory replenishment was established. The aim was to to create a link between market demand and factory. Following changes were implemented:
- Buffer inventory: Understanding the demand and the analysing stock requirement helped setup suitable buffer inventory levels as per scientific demand analysis.
- Feedback system established: Stock consumption and monitoring report was established as a ‘Kanban’ link, which helped communicate “real” customer demand back to production. Production schedules were linked with stock movement as per the ‘Buffer Penetration’ report.
- Measurement: Service level was established as a primary metric. Every stakeholder worked towards this metric as a holy grail.
- Cultural shift: The initiative brought about a momentous shift in culture, which formed the foundation for sustaining the gains.
Results – deep dive
After implementation of the system for about a month, the inventory and service level performances were compared. It was observed that inventory reduced and service levels improved dramatically. The service levels improved from 95.67% to 99.94% and Inventory levels dropped from 14.7 days to 8.1 days. Various costs associated with warehouse and distribution also reduced such as rents, inter facility transport cost etc.