beautifying inventory and service levels at a cosmetics company
TRANSCRIPT
Beautifying Inventory and Service Beautifying Inventory and Service Beautifying Inventory and Service Beautifying Inventory and Service
Levels at a Cosmetics CompanyLevels at a Cosmetics CompanyLevels at a Cosmetics CompanyLevels at a Cosmetics Company
James Fusco, CPIM
Background of Experience
• Unique position to learn APICS theories due to
my fresh start in the business
• Chance to experience a fresh ERP system
install and integration
• Maintained the item master and learned the
connections made with BOMs, work orders, and
purchase orders
The Cosmetics Industry
• Competitive and fast-paced environment-“newness” rules
• Our customers were used to 100% service level- almost a make to order environment, but just used make to stock methods
Issue #1:Lack of ERP System
• Previous component buyer placed blanket orders for mass quantities of shared componentry
• Previous methods of forecasting only looked at past weighted sales averages
• All planning and buying was done on proprietary spreadsheets
Issue #2:Marketing changes
• Marketing-driven packaging change to the entire product line, including primaries and secondaries
• Expansion of component variety (new sizes, colors, materials)
Issue #3:SKU Proliferation
• The company doubled in size in less than five years- the growth outpaced component lead times, leading to constant expediting
• The product line was rapidly expanding (five times the SKUs when factoring-in new “off-sizes” for kits, etc.)
0
100
200
300
400
500
600
700
800
900
19
98
-10
-01
19
99
-04
-01
19
99
-10
-01
20
00
-04
-01
20
00
-10
-01
20
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-04
-01
20
01
-10
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20
02
-04
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20
02
-10
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-04
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-10
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20
04
-04
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20
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-10
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20
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-04
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-10
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20
06
-04
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20
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-10
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20
07
-04
-01
20
07
-10
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20
08
-04
-01
20
08
-10
-01
20
09
-04
-01
20
09
-10
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20
10
-04
-01
20
10
-10
-01
20
11
-04
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20
11
-10
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20
12
-04
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20
12
-10
-01
20
13
-04
-01
20
13
-10
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20
14
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-01
20
14
-10
-01
Total SKUs Over Time
Total SKUs
0
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1000
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3000
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-10
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-12
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20
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-02
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20
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-06
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-08
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20
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-10
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20
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-12
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20
11
-02
-01
20
11
-04
-01
20
11
-06
-01
20
11
-08
-01
20
11
-10
-01
20
11
-12
-01
20
12
-02
-01
20
12
-04
-01
20
12
-06
-01
20
12
-08
-01
20
12
-10
-01
20
12
-12
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20
13
-02
-01
20
13
-04
-01
20
13
-06
-01
20
13
-08
-01
20
13
-10
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20
13
-12
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20
14
-02
-01
20
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-04
-01
20
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-06
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20
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20
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20
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20
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-02
-01
Component SKUs Proliferation Over Time
Total SKUs
Issue #4:High Costs
• No benchmark testing for component suppliers, which resulted in higher costs than necessary
• We had two warehouses on the east coast- one northern and one southern.
Formal Forecasting
• Formal forecasting began with a look to the future based on budgets.
– How can you hit your budget if your forecast
doesn’t support product equaling that dollar
amount?
Established a formal S&OP Meeting
• Heads of each channel/department attended
to make sure the plan matched the budget
• Noted individual SKUs that were selling either
much higher or lower than the forecast
• Allowed us to know of future product
discontinuations so we wouldn’t over-order
components
Production Planning Meetings
• Monthly meetings where the forecast was viewed against on-hand finished goods inventory.
• Based on the weeks on hand, we would plot a new production run accordingly.
• Went from holding 13 weeks of safety stock down to 8 weeks without sacrificing service level.
ERP System Integration - 1
• Brought the whole company “online”
• Reduction in the time to process an order from start to finish
• Vendors and co-packers also brought “online”
ERP System Integration - 2
• Item master and BOMs used with production work orders allowed for data manipulation that would aggregate all component demand without having to do it manually
• Gave visibility to all members of the operations team
“Make & Hold”
• Make and hold agreements with vendors for shared components that we could purchase in large quantities and reduce lead time
• Gave us economy of scale
• There were some issues, though…
Utilising Outsourcing
• Moved most of our component production to China
• Because of the new make and hold policies, we finally had the volume necessary to justify a production run in China
ERP System used to provide metrics
• Data from the ERP system could be manually manipulated after reports were run to make sure we weren’t too over or under-stocked on components
• I created my own “mini-MRP”
• Run rates for components were established and updated frequently
Vendor Relations enhancements
• New reporting tools from ERP system
allowed future planning with vendors
• Established an “Open Order Report” that
vendors could update- it showed the quantity
on order and expected due date for each item
• Run rates were shared in informal
conversations with vendors
Component standardisation
• Used the same neck size for various bottles, reducing the need for multiple customised pumps
• Different glass color requirements lead us to create a “clear” mold that we could paint any custom color after the bottle was made
Other Cost-Savings
• Benchmarking
• Vendor reduction
• Made suggestions to use-up excess inventory
• Went to only one warehouse
55,00%
60,00%
65,00%
70,00%
75,00%
80,00%
85,00%
90,00%
95,00%
100,00%
Order Fill Rate
Order Fill Rate
Linear (Order Fill Rate)
94,00%
95,00%
96,00%
97,00%
98,00%
99,00%
100,00%
101,00%
Line Item Fill Rate
Line Item Fill Rate
Linear (Line Item Fill Rate)
88,00%
90,00%
92,00%
94,00%
96,00%
98,00%
100,00%
102,00%
Unit Fill Rate
Unit Fill Rate
Linear (Unit Fill Rate)
SKU Proliferation Review
• Number of finished goods SKUs increased by 67% over the past 3 years
• Number of component SKUs increase by 61% over the past 3 years
$5 000 000,00
$5 500 000,00
$6 000 000,00
$6 500 000,00
$7 000 000,00
$7 500 000,00
$8 000 000,00
$8 500 000,00
$9 000 000,00
FG Value
FG Value
Linear (FG Value)
$-
$500 000,00
$1 000 000,00
$1 500 000,00
$2 000 000,00
$2 500 000,00
$3 000 000,00
$3 500 000,00
$4 000 000,00
$4 500 000,00
$5 000 000,00
Comp Value
Comp Value
Linear (Comp Value)