Sell More / Stock Less

Sell More / Stock Less

Inventory for OJus’s natural juice was stacked to the roof in the warehouse. There was no space left for any more fruit, empty bottles, or packaging. Meanwhile Theo, the Warehouse Manager, knew the situation was only going to get worse. OJus planned to introduce a new “Bubbly Jus” in the next quarter. He’d tried to find some extra space, but at this rate, the finished product was going to end up stored in one of the temporary trailers sitting past the last dock door at the end of the building. He screwed up his courage and called Suzanne, the VP of Operations, to alert her to the problem.

“I thought you had a Warehouse Management System,” Suzanne told him, baffled. “Isn’t that supposed to make sure this doesn’t happen? Never mind,” she said, before Theo could answer. She had an idea that the problem went beyond the possible insufficiency of the WMS. She immediately called a meeting of all the key department heads from Finance to Sales and Purchasing.

OJus’s supply chain was clearly broken, and she wanted to find out where and figure out a fix.

At the meeting, the first to speak was Michelle, the CFO. She proudly noted that her team spent hours each month working a series of Excel worksheets to make sure the company’s top line financial numbers were on target based upon posted sales. Her team did not really have time to focus on sales projections. Suzanne liked Michelle and overlooked Michelle’s limited knowledge about demand planning. During Michelle’s talk, the CFO made a point of letting everyone know that there was nothing in the budget to support expanding the warehouse.

Next up was Jonathan, the recently hired VP of Purchasing. He was just getting familiar with the food and beverage industry and was trying his best to make sure the company had the right materials on hand to manufacture the new product line for “Bubbly Jus” and every other SKU in the company’s inventory. He noted that his biggest challenge was obtaining a sales forecast that he could use to project future material needs. Due to a lack of this key planning information, he made sure that OJus had more than enough of everything in inventory so that no one would point to him for running short on supplies. Unfortunately, he reluctantly admitted, his approach was resulting in some overstocked items.

Everyone in the room knew that it was Jonathan’s over-purchasing that had over-filled the warehouse.

But was it really Jonathan’s fault?

Suzanne then asked Tim to speak. Tim was the VP of Sales and Marketing. He “lived and breathed” sales and promotions. He had great customer relations, and his team was directly responsible for boosting future sales trends for “Bubby Jus” and all the other popular OJus items. Tim relied upon his team to provide a detailed sales forecast by customer and SKU. But Tim never thought to share this vital information with anyone except informally during the weekly Sales and Operations Planning meeting when operational priorities were discussed to satisfy a two-week planning horizon.

Suzanne had her answer. The fault could not be laid at the door of any single department. Rather, each department needed better integration with the others.

Once the meeting adjourned, Suzanne wrote four action-oriented recommendations for the CEO that she considered would solve the overstocked warehouse problem.

1. Implement a Real Warehouse Solution – OJus had grown quickly, so they were still using an Enterprise Resource Planning System (ERP) that only provided for the most basic of warehouse needs. It was not a full-fledged Warehouse Management System (WMS) but only supported mobile barcode scanning, RFID, and integrated printing in the warehouse. A more advanced WMS would take care of several of the issues that had caused the overcrowded warehouse. First, such a system would optimize the organization of the products in the warehouse by assigning floor and shelving locations based on actual sales volumes and unit load dimensions. A full-fledged WMS would also regulate the volume of raw material needed. The system would automatically generate purchase levels when inventory levels got too low, and it could prevent stock from accumulating past a designated maximum. With these capabilities, a good WMS would prevent overstock of products and thus free up space to use for other items or purposes.

2. One Source of Sales Truth – the Sales Team at OJus had invested considerable time and money over the years in implementing a sophisticated sales forecasting solution that managed trade spend and set sales expectations. One significant shortcoming was that Sales did not share this forecast with Planning or Purchasing. Therefore, the company was unable to develop an accurate demand or supply plan to drive procurement and operations. As a result, departments were ordering more materials than needed so they wouldn’t run short, and inventory space was filled with excess stock. It was time to get out of the silo mentality and have departments share key data with all relevant decision makers.

3. Build a Demand Plan – Input the detailed sales data into an appropriate planning software system to support procurement and feed the existing ERP to generate proposed purchase orders and drive production work orders.

4. Hire a Planning Guru – It was one thing to have great folks leading each business area of the company, but Suzanne realized there really wasn’t anyone leading the Planning effort. Yes, they had a weekly Sales and Operations Planning meeting with members for all relevant departments, but who owned the Planning process? Maybe it was time to fill this important position.

Although Michelle, the CFO, had declared there was no money available to solve the warehouse problem, Suzanne was certain that the cost for an astute planner would be recouped by OJus in improved efficiency and the ability to provide more product for sales. Suzanne marched into the CEO’s office with conviction to make operations rise to the revenue of OJus.

Let RJMC assess your Supply-Chain before someone in your company drops an unexpected crisis in your lap. Whether your needs revolve around financial planning, warehouse management, trade promotion management or demand planning, we can assist you to identify the right solution for your company.

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Rubenstein / Justman Management Consultants (RJMC) is expert in IT planning. We can work with you today to quickly assess your current systems environment .

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