CASE STUDY: Cut Cycle Time by 92%
A Fortune 50 Corporation was in distress due to a very lengthy demand-supply cycle of 60 days. By the time the demand had been forecast, actual demand had often changed dramatically. In fact, the “reported demand” – the forecasted demand figure that drove “building orders” – lagged actual market demand by 3 months. Such inaccuracies created an extraordinary inventory burden for the company, its suppliers and the CFO.
The General Manager of Supply Chain asked us to design a WorkOut that engaged all the various stakeholders. The first WorkOut was able to decrease the cycle from 60 to 40 days, and the second from 40 to 20 days. For the first time, the “reported demand” was within the same calendar month as the actual demand. We achieved the 20-day target and were successful in stabilizing the cycle. This resulted in a savings of $1.8 million per quarter in inventory costs alone.
While a major move forward, after one year, the company realized that its competition was completing the cycle in 5 days. The GM sponsored more sessions in order to beat the competition. Demand is now reported on a a weekly basis – enabling a cycle time of a few days.
The cycle is stabilized, the initial the initial 20 day target was achieved and further WorkOuts have driven an additional 15 day reduction in cycle time. This work shaved off $1.8 million per quarter in inventory costs alone. That’s 7.2 million that followed directly to the bottom line.