A Quick-Hit Case Study: CPG Warehouse Consolidation Planning

CHALLENGE

A key component of a top tier supply chain is an efficient warehouse network that places the right product at the right place at the right time to meet customer demand.  Balancing the available space in multiple small regional warehouses against the forecasted order pattern and the minimum production batches on slow moving items creates a perfect storm of inefficiencies. Organizations are forced to deploy to available space.

In the “deploy to space” scenario, the inventory management team was hesitant to move inventory proactively for fear of incorrectly allocating inventory and customer orders that are not completely filled.  In this environment, it’s a logical assumption that small warehouses need to be consolidated into a single large regional distribution center.

The question is: How do you consolidate eight warehouses into a single facility over a fixed period of time without negatively impacting customer service and dramatically increasing inventories?

This was the challenge facing a large consumer packaged goods corporation.  We were tasked with leveraging the existing JDA Supply Chaing Planning Suite to plan the phase out of the existing warehouses and the inventory requirements for the new facility, as each existing warehouse was to close down in sequence over a 90 day period.  The warehouse consolidation program must mitigate any potential customer service level impacts.

Their “deploy to space” inventory policy was placing inventory in locations that were outside of the identified replenishment network and resulted in unwanted production requirements being triggered at the manufacturing plants.

The solution had to provide advanced visibility to projected excess inventory at the old facilities to minimize the impact to standard operations at each consolidation point.  The solution also had to minimizing inventory levels by getting a better handle on procurement, minimizing shipment costs, and remaining agile enough to respond to changes in customer demand.

APPROACH

We worked with the client to craft a solution that would consolidate shipment history and forecast from the facilities identified for shut down through time-phased maps to the new warehouse.  The solution provided complete visibility to projected excess inventory, by facility, based on the published cut over schedule.  This allowed the client to proactively plan inventory moves, secure equipment and resources based on the inventory move plan, and identify customer centric inventory to be placed in the new facility to stop non-essential inventory production signals to the manufacturing plants.

The overall solution was designed with the understanding that the client at some point in the future may need to re-activate the program structure to consolidate facilities in another area of the country.

RESULTS

We played a vital role in the success of the overall warehouse consolidation program through the early identification of excess inventory and the efficient allocation of new production to the proper location based on the warehouse cutover schedule.  Prior to the execution of the program, the client was moving a case of inventory an average of three times within the local warehouse network prior to shipment to a customer.

BENEFITS

  • Mitigated customer service concerns from a challenging ERP implementation in the prior year.
  • Reduction in overall intra-network transportation spend of up to $20 million.
  • Decreased the average transportation cost for an intra-network truckload by approximately 30%.
  • Projected reduction in network total inventory of between $60 – $75 million.
  • Dramatically reduced the average number of intra-network inventory moves from just over three to one point five.

If you are looking to root out inefficiencies in your supply chain network, let Vaco Supply Chain Solutions help. Give us a call at 804-282-2033 and let us develop a solution for your business.

We have worked with thousands of clients across a diverse set of industries.
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