Working Capital Reduction: Protective Textiles

Reducing working capital via stock reduction by $10M and a new S&OP Process

Industry

Manufacturing of protective textiles

Project Length

9 months, 1 consultant leading multiple teams

Objective

Reduce working capital via:

• Reduction of total inventory by $10M (c. 12,5%)
• Implementation of an inventory control system
• Implementation of a S&OP Process

Results

• Overall inventory for fibre, yarn and greige was reduced by $10M.
• Implementation of Inventory Control system that integrates with the client’s MRP system, providing additional functionality and data. This enabled them to base purchasing and manufacturing decisions on data and enabled them to quickly respond to dynamic demands.
• A new S&OP process was designed and implemented to deliver customer requirements on time, with minimal cost with integrated tiered performance reviews in all functional and hierarchical areas.

Why was Chartwell brought on board?

The PE’s strategy was to increase sales and improve EBITDA through substantial changes to ongoing business processes, and operational improvements.
Special priority was given to the reduction of working capital and the implementation of a Sales and Operations Planning process to ensure that the site team can manage production and inventory levels to meet fluctuating market demand on an ongoing basis.

One Senior Consultant was brought on board for 9 months to develop and implement the new process and system with the team.

Core project workstreams

Inventory Control System and Stock Reduction

Strategy

Review of total demand to categorize the different types of inventory and key strategies for reduction including:

• Safety Stock System implementation for Raw Materials and Intermediate goods inventories
• Lead-time reduction to limit WIP on the shop-floor
• Sell-Off programs for aged and obsolete stocks
• Quality improvement program to reduce creation of scrap and second quality goods

Safety Stock System

• Ensure the stock management system uses data to make purchasing and manufacturing decisions, moving away from “personal judgements” which lead to excessive stocks
• Built a custom tool to integrate with their MRP system and provide additional functionality to adjust target stock levels, responding to a dynamic demand
• Safety Stock System automatically recommend purchase and production orders, to be reviewed by managers in a streamlined process

Inventory Reduction by $10M

• Safety stocks set target purchase quantities for Raw Materials
• Intermediate inventories dropped with roll out of further inventory and production targets

S&OP Process Implementation

Implementation of a new S&OP process to ensure that Sales and Operations team had a shared plan to deliver customer requirements on time and with minimal cost, including:

• Set up of tiered performance reviews within each functional area with rolled up reporting
• Set up of scorecards to provide appropriate information in decision making meetings
• Alignment of key decision and escalation points both within and across functions to build an aligned monthly plan
• Rolling up key metrics and decisions to the Executive Team Review to ensure short term goals aligned with long term strategy

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