Component purchasing planning

This case study details the implementation of strategic solutions aimed at optimizing stock management, reducing operational costs, and improving logistics efficiency.

The company and its core values

The company featured in this case study is an internationally recognized partner in the development and manufacturing of high-quality coffee machines and other electronic appliances. With a strong global presence and an unwavering commitment to quality, the company collaborates with some of the world’s most renowned brands, meeting their expectations in both quality and design.

Discretion is a core value guiding all company operations, ensuring trust and long-lasting partnerships.

The operational challenge

The company was facing significant challenges in its stock management and operational efficiency. The main issues included:

• Average stock coverage: 67 days, considered high.
• Component stock: approximately €18.1 million (with an upward trend).
• Warehouse space: around 4,000 pallets, creating space constraints and logistical management issues.
• Lack of key indicators monitoring: KPIs such as stock levels, stock coverage, and others were not being monitored effectively.

Root causes identified

During the diagnostic process, several root causes were identified as contributing factors to the company’s challenges:

• Lack of monitoring for key indicators such as stock value, stock coverage, and supplier lead times.
• Component orders were based solely on low-accuracy forecasts.
• No consequences were in place for suppliers failing to meet the agreed service levels.

The strategic approach implemented

The solution to the operational challenges was built across several fronts:

Implementation of ABC classifications

A periodic ABC classification system was implemented based on frequency and volume. This classification enabled the identification of items in MRP, as well as the replenishment points.

Pilot of order points

An order point pilot was developed in Excel to validate the dynamic replenishment model.

Supplier renegotiation

A process was established to renegotiate with suppliers, focusing on lead times, delivery frequency, minimum order quantities (MOQs), and shipment packaging. Contracts were adjusted to ensure shorter delivery times and MOQs better aligned with production needs.

Development of tools and reports

A Pull Planning manual was developed, along with the standardization of planning processes. A standardized report was also created for sending forecasts to suppliers. Material flow management was also optimized, minimizing excess stock and improving responsiveness to production needs.

Figure 1  – Example of process standardization

Results achieved through the implemented approach

The implementation of these solutions delivered positive and significant results for the company:

• €455,975 reduction in stock in the pilot project.
• 20% reduction in average stock coverage.
• €2.5 million in annual savings.

Figure 2  – Average stock reduction

By implementing a strategy focused on efficient stock management, the company achieved substantial operational and financial improvements. The reduction in stock levels and the improvement in stock coverage not only generated significant savings but also freed up warehouse space and increased operational agility.

The company’s commitment to quality, combined with its ability to adapt to evolving market demands, was key to the successful implementation of these stock management strategies.

We are committed to respecting our clients’ confidentiality. While we have altered or omitted their names, the results are genuine.