Case Study: Industrial Valve Manufacturer and Trader

Industrial Valve Manufacturer and Trader – Inventory management for a business trading for 50 years.

This $30m business measured inventory turns as one of the key performance indicators to keep a check on cash flow. The business was buying mainly from low cost countries with a lead time of 10 to 12 weeks and had $6.0m in inventory.

However, measuring of inventory turns at big picture level, by itself, did not lead to any worth while action. Year-on-year results did not improve, in spite of many generic initiatives. Applying a key learning of lean - the use of PULL rather than PUSH - made all the difference.

How? Target Inventory turns was made as input to calculate replenishment order quantity. The underlying lean philosophy of pull rather than push was adapted successfully.

Results: Inventory dropped by 50% over a three years period, while sales remained relatively stable, thus doubling up inventory turns.