Working Capital Reduction: Breakfast Cereals

Releasing over £1M cash through stock reduction in a breakfast cereal production company

Industry

Food and Beverage – Breakfast Cereal production

Objective

Reduce stock holding across all categories and reduce number of pallets stored offsite with 3rd party logistics by >3,000pc

Goals:

1. Move to a fixed cycle production plan and optimise stocks
2. Procure raw materials, packaging and manufacture WIP JIT
3. Maximise use of onsite warehouse

Results

• Stock of raw material, packaging, WIP and finished goods reduced by more than 3,000 pallets
• Number of pallets stored offsite reduced by 3,000 plus >500 spaces freed up onsite that can be filled, worth ~£600k, releasing over £1M cash
• Core projects and sustainable structures were handed over to internal departmental leads with adequate training provided for ongoing improvement

Why was Chartwell brought on board?

25% growth over the past 3 years has led to an increased stock holding of raw materials, packaging, WIP and finished goods, with a corresponding increase in supply chain costs.

Chartwell was brought on board to work with the onsite team over a period of 4 months to improve the stock holding situation in all four areas and implement a sustainable system.

Core Project Workstreams

S&OP Process

• The existing S&OP process was fragmented with many key steps/processes not in place or functioning poorly
• The entire S&OP process from commercial sales forecast through to the customer was redefined with appropiate owners, KPIs and reporting structures

Finished Goods

Results:

• Finished goods stocks reduced by 2,000 pallets
• Improved OTIF performance
• 2 out of 3 third party distribution warehouses completely exited

Improvements:

• Moved to a semi-fixed production plan on a 6 week cycle with the highest volume products being produced every week
• Calculation of correct safety stock levels for every SKU and monitoring of stock levels against target
• Forecast accuracy measure and process established

WIP

Results:

• WIP reduced from over 1,500 pallets to under 500

Improvements:

• Bake plan aligned with packing plan
• Change in mindsets to only produce what is needed
• Production pack out all WIP to reduce part pallets going back to warehouse
• Review process for low life stock

Raw Materials & Planning

Results:

• Raw material and packaging stocks reduced by >600 pallets

Improvements:

• SAP got updated with correct lead times, order quantities and safety stock levels
• Lead times, minimum order quantities and pallet quantities were challenged with suppliers
• Mindset change to trust SAP and order based on what the system says

Handover of sustainable structures

Tiered Review Structures:

• Restructure of daily operations meeting to include key supply chain elements
• Setup of weekly supply chain team meeting to review KPIs and drive improvement actions

Improvement tools and structures

• Daily and weekly KPIs for supply chain team put in place
• New S&OP process clearly documented
• Role cards written for all staff involved in supply chain detailing key roles and responsibilities relating to the S&OP process

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